Converting my Bitcoins to sterling in the UK. Do I need to pay tax

[AndrewHenson]

Hello,

I have just started out bitcoin mining, I have a few orders for the butterfly labs devices, while I wait I have built a GPU rig at home that chuggs away at 2Gh/s. 

I want to cash in my bitcoins and convert to sterling to help pay off my credit cards.  Do I need to think about paying tax on my earnings from bitcoin mining?

I am based in the UK, so anyone who knows about UK tax law I would appreciate some guidance.

thanks


Andrew

[Foxpup]

I don't know about the UK specifically, but in general mining income is taxable as ordinary income based on the market value of the coins at the time you mined them (even if you don't sell them). If you later sell them for a higher price than they were worth when you mined them, you have to pay capital gains tax on the difference (if you sell them for a lower price, you have a capital loss; I don't know whether you can claim a deduction on capital losses in the UK).

[niko]

Not familiar with the UK law, but do look into "hobby income" or similar. Also, you may be able to deduct expenses (rig, electric) related to your mining operation.