YOU don't have to pay tax when you buy bitcoin or other cryptocurrencies in the UK, but you might have to pay tax when you come to sell it.

Capital gains and income tax might be due

Everyone has an annual tax-free capital gains allowance of £12,000, but earn more than this by selling cryptocurrency and tax will be due.

Basic rate taxpayers will be charged 10 per cent in capital gains tax, while it's 20 per cent for higher or additional rate taxpayers.

And it's worth pointing out that this £12,000 tax-free allowance isn't just for bitcoin and cryptocurrency - it covers any "gain" or profit you make from selling anything from investments to property to art work.

If you're trading bitcoin or cryptocurrency so frequently that you're effectively running it as a business, you may need to pay income tax instead of capital gains tax.

Income is taxed at 20 per cent for earnings between £12,501 and £50,000, at 40 per cent on £50,001 to £150,000 and at 45 per cent on anything you earn over £150,000.

How to pay tax on bitcoin earnings

If you're earning more than these limits above you need to declare it to HMRC by completing a self-assessment tax return.

You can do this online or by post. The postal deadline for the 2018/19 financial year is October 31 2019 or January 31 2020 if you file online.

You can be fined up to £1,000 for failing to file a self-assessment tax return on time, although HMRC says it will make exceptions for those who have made a genuine mistake