It is that time of year many a self-employed person dreads, the deadline to submit your tax return and pay anything you owe. But this year there is a question a select few should be asking themselves – have I profited from my investment in crypto-currencies?
If you have, you could be liable for tax.
In 2014 Revenue & Customs published guidelines making clear the different taxes that apply to any earnings from crypto-currencies.
For most people who have bought a few bitcoins some years ago, it is Capital Gains Tax that will be relevant.
This will apply to any profits, once you hit the £11,300 CGT threshold, not just if they are converted into a standard currency but if they are used to buy other crypto-currencies such as Ethereum or to invest in initial coin offerings (ICOs).
But in recent weeks there is some evidence that a few people are making trading in crypto-currencies a full-time job, in which case they are likely to be liable for income tax on their earnings.
Now, the acceleration in the value of Bitcoin and other crypto-currencies happened over the course of 2017 so it is unlikely many people will have incurred tax liabilities in 2016-17, the year HMRC is currently examining.
Dec 22nd 2017. The low point in my time as a crypto investor. It’s 5:30am and I’m rooting around in my desk drawers, reaching for my hardware wallet. This thing has given me many happy times, but this morning, I tear it from the box in a panic. Bitcoin is tanking. $15k. $14.5k. $14k. This is it. The bubble has burst. I’m out!
The only thing harder than watching your profits disintegrate is realising that your mental health is in a worse state than your Bitcoin-to-USD balance. This is my first day off work as the Christmas holidays arrive. I haven’t had time off for months, and yet the sleep I’ve been longing for has been broken by the bright light of my smart phone. I’ve been watching the price of Bitcoin all night, drifting in and out of dreams where I see numbers ticking up and down. And as my girlfriend wakes up to the sound of my Macbook starting, I know I’m in trouble.
“Pig, what are you doing?”, she calls out, in complete bemusement (that’s her pet name for me, by the way?—?neither of us know why). Just yesterday we had a long conversation about how crypto was taking over my life. Apparently, I haven’t been ‘present’ enough, and she’s tired of me staring at my phone constantly. Now I’m stood here in the early hours of the morning, wearing nothing but my boxer shorts, frantically punching in the pincode to my Ledger. “Nothing. I just need to send an e-mail to someone at work”, I reply, praying that she doesn’t come into the spare bedroom. A few minutes go past and there she is, standing in the doorway, staring at my Coinbase account. She shakes her head and walks off without saying anything.
The United Kingdom’s technology development arm, Innovate UK, is doubling down on its support for blockchain-based technologies, it announced on Jan. 22.
The U.K.’s nondepartmental public office said it would invest a total of £19 million ($26.6 million) in projects which will result in new products or service in the fields of emerging and enabling technologies, including using distributed ledgers. The agency will also offer a further £12 million ($16.8 million) for businesses trying to recruit graduates to help develop their project.
Respondents have until March 28, 2018 to submit their proposal, and must be run by a business or a research and technology group. The projects’ scopes must cost at least £35,000 and last at least for three months, but can go on to three years with a cost of £2 million, according to the announcement. Also a part of the eligibility criteria is that businesses should be able to raise up to 70 percent of their costs on their own.
While cryptocurrencies have been a talking point at previous World Economic Forum conferences, they have come to the fore in Davos this year.
Following a breakout year which saw Bitcoin rise to an almighty high of $20,000, alongside the massive growth of other altcoins, it’s hardly surprising that one of the major talking points at WEF would be the future of cryptocurrency.
With financial industry leaders coming together at the most important annual event on the economic calendar, media outlets took their chance to ask the top minds for their two cents worth on the current and future prospects of virtual currencies.
Cointelegraph is currently attending the summit in Davos and has reported continual resistant perceptions towards cryptocurrencies.
These views stem from a lack of a regulatory framework for virtual currencies which has made some of the world’s prominent banking and financial institutions hesitant about investing and supporting cryptocurrencies.
UBS Chairman Axel Weber said as much in an interview with Bloomberg, saying his firm would not recommend cryptocurrency adoption or investment to its clients until there is clarity on future regulatory action.
As per usual, the vibrant and feisty cryptocurrency community has been watching developments at Davos keenly, and there has been plenty of backlash in response to any FUD or untoward comments about cryptocurrencies.
Persistent demand around the $10,000 mark appears to have not only neutralized the immediate bearish outlook on bitcoin, but also hints the cryptocurrency could be building a base for an eventual move higher.
Prices on CoinDesk’s Bitcoin Price Index (BPI) fell to $9,972.29 yesterday, before witnessing a quick recovery to $11,000 levels. This is the fourth time in last week that bitcoin (BTC) has recovered losses after sinking below $10,000 levels. As of writing, bitcoin is at $10,990 levels. The cryptocurrency has appreciated by 3.38 percent in the last 24 hours, according to OnChainFX.
On Coinbase’s GDAX exchange, BTC witnessed two-way business yesterday with prices hitting highs and lows of $$11, 370 and $9,945, respectively, before closing (as per UTC) at $10,824 levels.
The situation looks no different today as the rebound from the intraday low of $10,450 seems to have run out of steam above $11,000 levels. The cryptocurrency was last seen changing hands on GDAX at $10,970 levels.
Bitcoin miners passed a significant milestone over the weekend, when they mined the 16.8 millionth bitcoin from the cryptocurrency’s planned total of 21 million coins.
This means that 80 percent of all bitcoins that will be in existence have already been mined. According to estimates, bitcoin will reach its final coin figure sometime in 2140. (See also: How Does Bitcoin Mining Work?)
Over the years, bitcoin has adjusted the number of coins in circulation through a complex calibration of miner rewards and problem difficulty. Bitcoins are awarded to miners who solve complex mathematical problems through intensive computation. The reward number is halved every 210,000 blocks, per bitcoin’s original algorithm.
Immediately after bitcoin’s launch, miners earned 50 coins as reward for solving problems. It was cut to 25 in 2012 and 12.5 in 2016. In two years, miners can expect 6.25 bitcoins as rewards. The difficulty of problems has kept pace with rewards. As the number of rewards has decreased, bitcoin’s problem difficulty has increased, thereby making it more difficult and computation intensive to earn the coin.
[Just a development in the market that I found interesting]
Fernhill Corporation (OTC PINK: FERN) is pleased to report its progress on the development of a bitcoin mining rig with onboard energy storage and peak shaving capabilities.
CEO Adam Kovacevic said:
“Over the last several weeks we have been researching and designing a platform to develop a bitcoin mining rig that has the capability of self-regulating its demand for power. A mining rig specifically built to peak shave can prove to be a viable solution to assist in driving down the high costs of power consumption associated with the bitcoin mining business.”
Peak shaving is the process of reducing the amount of power purchased from a utility company during peak demand hours. Globally, peak pricing structures allow for utility companies to bring on additional capacity to meet the obligations of increased power demands during specific times of the day. This additional capacity comes at a cost to the consumer as typically older, costlier to run power generation equipment is brought online to keep up with peak demand. Peak power pricing is substantially higher than normal rates in order to encourage users to reduce their consumption during these specific times.
Fernhill’s CEO concluded:
“The development of a system that can run independently off the grid during peak hours is intriguing. We believe that a feasible solution can be developed to significantly decrease the energy costs associated with bitcoin mining by offsetting the electric demand usage times. Electricity costs associated with bitcoin mining could be decreased by more than 30% in some instances by introducing a system with peak shaving capabilities.”
Fernhill estimates that the first mining rig will be completed and delivered to its client for evaluation in approximately 30 days.
A tax loophole which reduces Bitcoin investors’ gains to zero will be exploited by people filling in their returns for this tax year, potentially creating millions in lost revenue for the Government, experts have warned.
HMRC is expecting to see a surge in the number of taxpayers declaring gains from cryptocurrencies this year after many investors sold their holdings after values soared, leaving them with huge profits.
However the taxman’s anticipated windfall could be far less than expected thanks to a loophole which lets taxpayers class their investment in cryptocurrency as “gambling”, winnings from which are tax-free.
An HMRC spokesman said:
“We don’t normally tax betting and gambling because it is usually not classed as trading income…”