A young investor from Cornwall is facing a common but complex modern financial dilemma after his early bets on Bitcoin paid off handsomely. Andy, 25, from Truro, has seen his cryptocurrency holdings grow to well over £7,000, prompting him to seek urgent advice on his potential tax liabilities.
The Crypto Windfall: A Decade of Investment
Andy's journey into digital currency began around ten years ago when he first invested £300 in Bitcoin. He later added another £500 to his holdings. His involvement deepened in 2024 when he performed website design work for a client between July and November and chose to be paid directly in Bitcoin.
While the value of his assets has been volatile, the overall trend has been significantly positive. Last year, he crystallised some of this gain by withdrawing £7,000 to use as a deposit for a car. This transaction sparked his concern about whether he owed tax on his cryptocurrency returns and, if so, how to proceed.
HMRC's View: Crypto as an Asset and as Income
The crucial guidance from Metro's consumer champion, Sarah Davidson, is clear: yes, tax is likely due. In the UK, HM Revenue & Customs (HMRC) does not treat cryptocurrencies like traditional money for tax purposes. Instead, they are classified as a form of investment asset, similar to shares or property.
This distinction creates two separate potential tax events for someone in Andy's position. Firstly, the Bitcoin he purchased himself is subject to Capital Gains Tax (CGT) when he sells or disposes of it. Every UK adult has an annual tax-free CGT allowance, which for the 2024/25 tax year (6 April 2024 to 5 April 2025) is £3,000. Any gain above this threshold is taxable.
Secondly, the Bitcoin he received as payment for his web design work is treated differently. This is considered income and may be liable for both Income Tax and National Insurance Contributions, depending on his total earnings for that tax year.
Critical Deadlines and Action Required
Regardless of the final tax calculation, Andy – and anyone in a similar situation – must register for self-assessment and file a tax return for the 2024/25 year. The absolute deadline for online submission is 31 January 2026, with any tax owed also due by this date to avoid late payment penalties.
The process involves setting up a Government Gateway account and meticulously working through the return. Calculating the gain on purchased crypto requires finding the difference between the purchase price and the sale value. For the income in Bitcoin, its value in pounds at the time it was received must be declared.
Given the complexity, individuals are advised to follow HMRC's specific guidance on cryptoassets or consider hiring an accountant, which typically costs between £150 and £500. The key takeaway is to act immediately, as leaving it until the last minute risks errors and potential fines.
