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I dont think my accountant knows how to tax BTC. watch

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    Hey, Last year i made an investment in to Bitcoin as well as used it to receive freelance pay as it had a lot less fees than paypal.

    I have made 29k in from jobs and only cashed out 34k at the moment i still have around 2.5 BTC left and 0.3BTC in other investments.

    Now my accountant wants so do 20% for income tax so around £3500 in tax plus 40% difference for capital gains. this seems as i will be paying around 16k for tax this year which is quite a lot. And i have not cashed out everything. I do have 18.6k in my bank account and rest in savings.

    I dont know if i this is the right way to do this or if there are any alternatives i could follow.

    Edit:
    I am a full time student but do freelance programming in my free time.

    I want to buy a car for around 6-7k with insurance this week and want to make sure i will have enough for taxses as well or will i be forced to cash out BTC at the low price atm.
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    (Original post by RandomName12311)
    Hey, Last year i made an investment in to Bitcoin as well as used it to receive freelance pay as it had a lot less fees than paypal.

    I have made 29k in from jobs and only cashed out 34k at the moment i still have around 2.5 BTC left and 0.3BTC in other investments.

    Now my accountant wants so do 20% for income tax so around £3500 in tax plus 40% difference for capital gains. this seems as i will be paying around 16k for tax this year which is quite a lot. And i have not cashed out everything. I do have 18.6k in my bank account and rest in savings.

    I dont know if i this is the right way to do this or if there are any alternatives i could follow.

    Edit:
    I am a full time student but do freelance programming in my free time.

    I want to buy a car for around 6-7k with insurance this week and want to make sure i will have enough for taxses as well or will i be forced to cash out BTC at the low price atm.
    Being paid in BTC or any cryptocurrency isn't too complicated tax wise as long as the calculations are done in a structured way. (The 40% CGT looks a bit ridiculous to me... but I can't see the exact numbers so is hard to check).

    I agree with the income tax calculation though so you will need to pay £3500, the above assumes you are a basic rate tax payer and that you have a full tax free allowance of £11,500 to use up, i.e you have not received any other paid work).

    Let start with your income tax liability: The way to calculate your BTC income tax liability is to convert the value of bitcoin on the day you were paid into the equivalent market rate for GBP. (You may need to look up some historic BTC - GBP conversion rates to get this correct). If you were paid monthly then you need to do these conversions for each monthly payment you received at the prevailing BTC -> GBP. Remember you are entitled to £11,500 income tax free allowance for the year 2017 - 2018. (£11,000 for 2016-2017 so you need to factor this into any calculations for your income received that year). By looks you will be a basic rate payer so anything above that threshold you will be taxed on 20% (Unless you keep getting paid more BTC )

    Now when you hold BTC it's essentially treated as an investment so you are on the hook for any capital gains (Or losses!) that may happen. So for each BTC investment and BTC payment you have received you need to note the value in GBP at the receive date and the value in GBP on the sell date. The difference in these values are the capital gains/losses that you have made. Total all of these up for all BTC you have sold for the year and calculate the net gain or loss. (You are allowed to offset any gains you make on BTC investments with any losses you have made, this could happen if you were paid in BTC and the price then fell before you could transfer into GBP).

    Capital gains tax is currently 10% for basic rate tax payers which I think you are, so you'll pay 10% on the positive difference between the value of the BTC in GBP at investment/payment date and the value at the date you sold the assets. You are also entitled to £11,300 tax free capital gains for the year 2017-2018.

    Let me know if any of the above is unclear! As a disclaimer I am not an accountant nor do I work in the field of financial advice but I have some experience in this as my partner has been paid in cryptocurrency before and we are in the process of filling in the forms for HMRC.
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    (Original post by pa1641)
    Being paid in BTC or any cryptocurrency isn't too complicated tax wise as long as the calculations are done in a structured way. (The 40% CGT looks a bit ridiculous to me... but I can't see the exact numbers so is hard to check).

    I agree with the income tax calculation though so you will need to pay £3500, the above assumes you are a basic rate tax payer and that you have a full tax free allowance of £11,500 to use up, i.e you have not received any other paid work).

    Let start with your income tax liability: The way to calculate your BTC income tax liability is to convert the value of bitcoin on the day you were paid into the equivalent market rate for GBP. (You may need to look up some historic BTC - GBP conversion rates to get this correct). If you were paid monthly then you need to do these conversions for each monthly payment you received at the prevailing BTC -> GBP. Remember you are entitled to £11,500 income tax free allowance for the year 2017 - 2018. (£11,000 for 2016-2017 so you need to factor this into any calculations for your income received that year). By looks you will be a basic rate payer so anything above that threshold you will be taxed on 20% (Unless you keep getting paid more BTC )

    Now when you hold BTC it's essentially treated as an investment so you are on the hook for any capital gains (Or losses!) that may happen. So for each BTC investment and BTC payment you have received you need to note the value in GBP at the receive date and the value in GBP on the sell date. The difference in these values are the capital gains/losses that you have made. Total all of these up for all BTC you have sold for the year and calculate the net gain or loss. (You are allowed to offset any gains you make on BTC investments with any losses you have made, this could happen if you were paid in BTC and the price then fell before you could transfer into GBP).

    Capital gains tax is currently 10% for basic rate tax payers which I think you are, so you'll pay 10% on the positive difference between the value of the BTC in GBP at investment/payment date and the value at the date you sold the assets. You are also entitled to £11,300 tax free capital gains for the year 2017-2018.

    Let me know if any of the above is unclear! As a disclaimer I am not an accountant nor do I work in the field of financial advice but I have some experience in this as my partner has been paid in cryptocurrency before and we are in the process of filling in the forms for HMRC.
    Ah now that sounds a lot fair as the 40% would make me lose more money than gain. also i made 3 cashout losses not big 3-4k in total losses. ATM i halted the freelance work as i am back in college and need to focus on that. i have a meeting with accountant tomorrow i will ask her to explain how she will do it as i made a full spread sheet and stuff ready for her to analyse. as long as i dont need to pay more than 18k tax i will be happy
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    (Original post by RandomName12311)
    Ah now that sounds a lot fair as the 40% would make me lose more money than gain. also i made 3 cashout losses not big 3-4k in total losses. ATM i halted the freelance work as i am back in college and need to focus on that. i have a meeting with accountant tomorrow i will ask her to explain how she will do it as i made a full spread sheet and stuff ready for her to analyse. as long as i dont need to pay more than 18k tax i will be happy
    Given CGT higher rate is 20% and you get £11,100 CGT free I think your accountant is not right.
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    (Original post by natninja)
    Given CGT higher rate is 20% and you get £11,100 CGT free I think your accountant is not right.
    Spoke to her today, She estimates 9k in taxses but is not yet sure how she is going to do it.

    I understand paying income tax (28k - 3.5k) and because i cashed out 34k rest would be capital gains. However she is confused as for next tax year i still plan to have around 3 BTC which i still have no cashed out. She is going to ask for more information in the training company in 2 weeks and i should be able to find out more information. I am leaving 10-12k in my bank for just in case.
 
 
 
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