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I will be cashing out 10k+ worth of Bitcoin soon, this could mean I end up selling it and having several people send me FIAT to my bank account. Do I become liable to tax in this case? I am not being paid for a service, it is as an asset.

Thanks

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    First, add a jurisdiction; tax laws are what matter here. Note that any tax you pay would likely be based on the difference between what you bought (or 'mined') the bitcoin for, vs what you sold it for. ie: if it cost you $4k to obtain the bitcoin, and you are getting $10k in the end, then you made a profit of $6k. Not sure where you got the idea that only payments for services are taxed... – Grade 'Eh' Bacon May 25 '17 at 17:06
  • I only every bought £200'ish of btc, I traded cryptocurrencies to my current amount. What I mean is it's just one user sending money to another, therefore could it be seen as a gift? – user56929 May 25 '17 at 17:32
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    No. It is not a gift. You traded currencies on speculation to make money. In that way, your bitcoin should basically be taxed in a similar manner to if you traded stocks. Would you say "I only bought $200 in Apple shares, and traded for IBM, GM, Ford, and BP. I basically just traded shares for shares, therefore it's a gift, right?" No. You wouldn't say that. If you are about to get $10k cash off of $400 invested, you made a profit of $9,600. Congratulations! But you will probably still need to pay tax on that profit [what is your jurisdiction?]. – Grade 'Eh' Bacon May 25 '17 at 17:38
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    @user56929, from that comment it sounds like you're not asking about tax liability, but for advice on how likely you are to get caught cheating on taxes in this situation. – user4556274 May 25 '17 at 17:49
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    In the USA, banks are required to report transactions that exceed a certain value, or a pattern of smaller transactions that are repeated to exceed that certain amount. It is my understanding that the US Federal Government uses that data to look for criminal activity, including tax evasion. I have no idea if the UK has similar laws or not. – Michael May 25 '17 at 18:06
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Generally bank transfers are not in themselves liable for tax.

However making profit generally is taxed either as income, capital gains or some combination of the two. It seems that in the UK cryptocurrencies are being treated like other currencies for tax purposes and that trading profits/losses may count as either income or capital gains depending on the circumstances.

https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies

However I do not know how to unravel whether particular trading activity would count as income or capital gains. I would suggest gathering as much information as possible and then discussing this with an accountant.

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    It is worth noting that (assuming the OP has no other capital gains) the profit would be under the personal exemption threshold in the U.K. anyway. Technically you are still supposed to declare it though - in the OP's shoes I would register for self assessment and complete a tax return myself, but would not expect any payment to be due as a result. – Vicky May 26 '17 at 6:42
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    Indeed, if it counts as capital gains (I'm not an expert on figuring out where the line between income and capital gains is drawn and the government advice linked above is clear as mud) and if it's only 10K (the OPs post said £10K+) then there is likely no tax to pay. – Peter Green May 26 '17 at 12:48

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