Taxes (UK)

[Jobe7]

Fair amount of discussion going on re: taxes.

This is for those in the UK,

https://www.gov.uk/set-up-sole-trader

Please note that you don't actually NEED to register until you start trading, it doesn't say it on the site, and I really can't remember where I know it from, but ye, its true, but do feel free to double check if you don't trust what I say (I do suggest double checking for yourself, as I'd rather people not get in trouble "because some random bloke on the forum said so!").

Here's the rates

https://www.gov.uk/income-tax-rates

This does cover 'personal income' also. So if money is just magically appearing in your (personal) bank account (selling btc) then when it goes over £8,105 (in a year) then you (legally) should declare it, assuming you're not 65+ in age.

So -

1) You CAN buy/sell btc, make lots of cash, and NOT declare as a trader (but still need to pay tax over the threshold - personal income).
2) IF you get into a bitcoin business then you do NOT need to state your business until your very 1st trade (though if you plan to do extremely well then you should probably state your business before hand).

Your personal income is your 'profit', if you're not a business/sole trader and you've 10's of thousands coming into your bank, then you should do something about it. If you've got lots of money coming in and out and not setup as a business, it can look like the whole thing is profit from somewhere.

If you state you're a sole trader and certain costs are expenditure then this effects the amount you'd pay as tax. If you're buying/selling small amounts, I really wouldn't be concerned, the amount will just get added onto your wages/personal earnings. If you don't have a job/no wages, then they couldn't care less if you're dealing with amounts less than £8,105 per year.

If you have a job, the amount (if you declare it as extra earnings) get added on.

Well, you can find pretty much all the information via the links, if you're making lots of money and are legitimately concerned how/what to declare as tax, feel free to PM me, I'll help if I can, but tax law is not my specialisation.

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[nwbitcoin]

This isn't quite right.

If you think you are going to be making any money regularly, you need to talk to a local tax office as soon as possible.

What you spend and sell is just turnover, its not a profit.  Your profit is the difference.  This is what you are taxed on.  If you spend £10000 on bitcoins, and sell then for £15000, then you would pay taxes on £5000, at your income tax rate.  If you were not gaining an income from anything else, not even benefits, then £5000 would be below any taxable income, and you would pay no tax.

But you still need to tell the tax man that you earnt it in the first place.

The only time the turnover becomes an issue is when it hits the VAT threshold which is around £100K ( not checked for a few years) then you MUST register with the customs for VAT as soon as you think it may happen. 

Never, ever try and fool the customs.  They have more power than anyone, and WILL make your life hell if they think you are taking the mickey.

I used to be a government funded business advisor up until 2011.

[Jobe7]

This isn't quite right.

If you think you are going to be making any money regularly, you need to talk to a local tax office as soon as possible.

What you spend and sell is just turnover, its not a profit.  Your profit is the difference.  This is what you are taxed on.  If you spend £10000 on bitcoins, and sell then for £15000, then you would pay taxes on £5000, at your income tax rate.  If you were not gaining an income from anything else, not even benefits, then £5000 would be below any taxable income, and you would pay no tax.

But you still need to tell the tax man that you earnt it in the first place.

The only time the turnover becomes an issue is when it hits the VAT threshold which is around £100K ( not checked for a few years) then you MUST register with the customs for VAT as soon as you think it may happen.  

Never, ever try and fool the customs.  They have more power than anyone, and WILL make your life hell if they think you are taking the mickey.

I used to be a government funded business advisor up until 2011.

Where in law does it say "you still need to tell the tax man that you earnt it in the first place." or similar to mean the same thing? Seriously, would be nice to have this pointed out in black and white.

The only time the turnover becomes an issue is when it hits the VAT threshold which is around £100K ( not checked for a few years) then you MUST register with the customs for VAT as soon as you think it may happen.  

I think it's 75k nowadays for an ltd, don't quote me on that though, been a few years also since I needed to look into such things in detail.

And yes, the term 'profit' isn't correct, hence why I used ' '. Using that term makes it easier to explain however in terms of paying tax. If you are depositing large amounts of cash into your bank account, then you are liable for tax when you hit the threshold (as you know).

it can look like the whole thing is profit from somewhere.

If you had standard benefits (JSA) then you could still earn £5000 from btc and not need to declare. If you have any other income AND the £5000 coming in (or any other amount of btc into fiat) then this counts towards your tax thresholds. e.g. you have a part time job that earns you £4000 a year and you made £5000 on btc that you stuck into your bank, then your total is £9000, and yep, you pass the threshold, but you only pay tax on the amount over the threshold.

I should've explained that better.

The tax office would dearly like everyone to declare exactly how much they're getting, but as the law stands you don't need to unless you pass the threshold. But ye, as mentioned above, if I am incorrect then please point me in the direction of the law that states otherwise.

Most of that £5000 can go back out as expenditure though.

edit: Just to add, I believe the reason that HMRC doesn't require anyone to state earnings unless they pass the thresholds is because things would get a little silly if everyone who washed a car, or a house window, for every £10, or £50, everyone who was earning under 8k a year had to declare (even though they wouldn't get taxed). But ye, again, if it does say it in law, please point me in the right direction, ty.

[Jobe7]

what worries me (but doesn't surprise me) is this bit

I used to be a government funded business advisor up until 2011.

But ye, I'm hoping you can point to the law where it states that you have to disclose any earnings to HMRC pre-threshold limit.

I don't mean to be digging at you, but it just highlights the fact of government officials and how they 'think' they are enacting law when they're stealing from you or screwing you over, but in fact they're just acting upon "because my boss told me so, and I'll lose my job if I don't steal from you"

But hey ho, hopefully you'll point out the law/statute and prove me wrong

[omgitsmehehe]

it can look like the whole thing is profit from somewhere.

If you had standard benefits (JSA) then you could still earn £5000 from btc and not need to declare. If you have any other income AND the £5000 coming in (or any other amount of btc into fiat) then this counts towards your tax thresholds. e.g. you have a part time job that earns you £4000 a year and you made £5000 on btc that you stuck into your bank, then your total is £9000, and yep, you pass the threshold, but you only pay tax on the amount over the threshold.

This is entirely incorrect. The JSA allow you to earn anything but not more than what they are paying you. For example;

You work 5 hours per week and earn £30.
JSA will disregard the first £5 and deduct £25 from your weekly benefit.*
So if you received £40 per week in benefits you would realistically receive £15 from JSA + £30 from work = £45.

*Deductions are based on your circumstances and may differ

[Jobe7]

it can look like the whole thing is profit from somewhere.

If you had standard benefits (JSA) then you could still earn £5000 from btc and not need to declare. If you have any other income AND the £5000 coming in (or any other amount of btc into fiat) then this counts towards your tax thresholds. e.g. you have a part time job that earns you £4000 a year and you made £5000 on btc that you stuck into your bank, then your total is £9000, and yep, you pass the threshold, but you only pay tax on the amount over the threshold.

This is entirely incorrect. The JSA allow you to earn anything but not more than what they are paying you. For example;

You work 5 hours per week and earn £30.
JSA will disregard the first £5 and deduct £25 from your weekly benefit.*
So if you received £40 per week in benefits you would realistically receive £15 from JSA + £30 from work = £45.

*Deductions are based on your circumstances and may differ

What you said is very true, but I think you totally missed what I said .... I probably should've tried explaining it a different way, or a few ways.

-------------------------

OK - if you have a part time job, then that amount (as you rightly said) is deducted from your JSA, etc, etc, as you said.

IF you have OTHER earnings (e.g. Bitcoins, shares, stock, steady income from a spouse, etc, etc, etc), then THAT is added onto your JSA and if you break the threshold then you'll be paying tax appropriately.

I did not talk anything about job/work/jsa, I was just referring to income via bitcoin. But yes, you are very correct in what you say. But you are incorrect in reading what I said.

IF (as an example) - you received £4000 for some random reason (lottery, inheritance, gambling, etc, etc), and declared that, AND you were receiving the full JSA. Then your YEARLY (annual) taxable income gets added onto your JSA.

There is a difference between working and having only part of your JSA and having your full JSA & an other income source happen.

[azw409]

Here's a hypothetical question, lets say I earned 100BTC on some private enterprise and I wanted to declare that on my self-assessment form and so I would owe 40BTC in income tax.

Since there aren't any regulated exchanges in the UK that will change this into GBP, what's the HMRC's bitcoin address so that I can send the payment to them ?

[Bitcoinorama]

Umm...guys I actually brought all this up in a thread pertaining to mining the other day. My understanding was that as with shares you'll be liable to capital gains when realising the value in fiat.

Someone sent me this link, worth checking out from the FT the other day;

http://www.ft.com/cms/s/2/42ca6762-bbfc-11e2-82df-00144feab7de.html#axzz2THTHmJC7

Looks like they are trying to comprehend cryptocurrencies...

[azw409]

What the hell is everyone talking about paying tax for ?

This is the whole benefit of bitcoin. . they cannot tax it . .

It's your moral duty to pay tax to pay for services that you use (or may use) and to help provide a safety net for those less fortunate than yourself which you maybe one day. I may not agree with the rate of tax or some of the things that its wasted on, but I would always want at least some tax.

Tax avoidance was never the point of Bitcoin, it was free trade and removal of the financial vampires that 'own' the current financial system.

[Dougie]

So because I'm a relatively low investor, I'd never be cashing out at anything over £8k a year. So I never need to declare anything if I ever actually cash out. That is nice to know!

Thanks for this. You hear so much about declaring US tax and the forms to fill in but not much about UK.

[solex]

What the hell is everyone talking about paying tax for ?

This is the whole benefit of bitcoin. . they cannot tax it . .

It's your moral duty to pay tax to pay for services that you use (or may use) and to help provide a safety net for those less fortunate than yourself which you maybe one day. I may not agree with the rate of tax or some of the things that its wasted on, but I would always want at least some tax.

Tax avoidance was never the point of Bitcoin, it was free trade and removal of the financial vampires that 'own' the current financial system.

There is no moral duty to pay tax. Please read this quote:
http://en.wikipedia.org/wiki/James_Avon_Clyde,_Lord_Clyde

Tax avoidance is perfectly legal (reducing the tax amount with allowed offsets). MPs are experts at this by renting out a speculative property and calling it their "primary" residence, while living in a "secondary" residence, to avoid capital gains tax when they sell their speculative ("primary") residence.

It is tax evasion which is morally wrong and illegal. Cash is just as much a vehicle for this as Bitcoin.

[azw409]

It is tax evasion which is morally wrong and illegal. Cash is just as much a vehicle for this as Bitcoin.

Apologies, I meant tax evasion and I'm in complete agreement with you on this. Bitcoin could be a huge vehicle for the democratisation of money with a more voluntary tax system - although I'm not sure how well that would work in practise.

[solex]

It is tax evasion which is morally wrong and illegal. Cash is just as much a vehicle for this as Bitcoin.

Apologies, I meant tax evasion and I'm in complete agreement with you on this. Bitcoin could be a huge vehicle for the democratisation of money with a more voluntary tax system - although I'm not sure how well that would work in practise.

If I put my idealist hat on then my hope is to see governments reduced to about 30% the size they are, which is reasonable considering they have expanded so much in recent decades, Also, that they are funded via sales tax (VAT/GST) only, paid by merchants. Property and vehicle taxes are still viable in a Bitcoin economy. Income tax can be zero :-)

[Pteppic]

From the HMRC website;

If you don't normally complete a tax return
If you have worked out you have no Capital Gains Tax to pay, you don't need to give HMRC details of your gains or disposals.

I was happy when I saw that. In other words, a married couple can realise £21,800 (£10,900 each) in capital gains each year without having to even contact HMRC.

[azw409]

@flibbr Sorry, I don't have any right or desire to force you to do anything.

I was merely stating that we all have a moral obligation to not be a burden to our community and to pay for services that we use - I presume that you were educated, may need health care at some point, enjoy a relatively safe environment and have used public services at some point. It all needs to be paid for and most people would want to contribute a share ?

It's pretty hard to find a society that has none of these things - but if you want to try it, I believe Somalia is probably the closest thing :-)

[Jobe7]

So because I'm a relatively low investor, I'd never be cashing out at anything over £8k a year. So I never need to declare anything if I ever actually cash out. That is nice to know!

Thanks for this. You hear so much about declaring US tax and the forms to fill in but not much about UK.

nps, the aim of the game is 'keep your money in bitcoin currency as much as possible', the more you can, the more you benefit.

E.g. got food to buy? items to buy? etc, convert £ to BTC a couple of weeks in advance, then spend in btc when 1-2 weeks have passed.

I'm all for taxing, it is an evolutionary step, and will come eventually. I want to support the services I use and/or like, but I do NOT want to pay for wars of mass murder and theft of land, wealth and liberty. But atm, they can't because they havn't built a framework to tax btc AS btc, so hey ho, let the people enjoy what the very rich have always and still enjoy

edit: Btw, as I pointed out in a different thread (somewhere in this section), capital gains tax does not cover Bitcoin. Until it says it in black and white and by law, you do not even have to declare Bitcoin as capital gains.

You do (well, so they say) need to declare when coverting to fiat, and that conversion turns into profit and goes over a threshold (as noted above). But keep in mind your expenditures before declaring

[dcl595]

Only just skimmed through this thread, but I was under the impression that vircur trading would be under the same tax laws as forex trading, eg non taxable if it isnt your main source of income. Could anyone verify or dismiss that?

[ukuna]

There is no money, there is only a GPB note! (bank of england)... its not money
there can be no taxes
notes cannot be taxed
if you earn GPB notes, it is an obligation, not money (promise to pay)
UK and all fiat countries are operating under the 1913 & 1933 US Inc BANKRUPTCY!

this is how to look at it

for more education:
http://www.youtube.com/watch?v=Pmpa2SWxaw4