How to buy Bitcoin in the United Kingdom

The United Kingdom is currently one of the biggest markets for crypto currencies in the world, and Bitcoin and other altcoins are very popular with UK residents. The market is fairly liberal to date and this has made it easier than ever before to purchase and trade cryptocurrencies in the UK, as new related services and exchanges are being launched all the time and the overall field of Bitcoin transactions becomes more mainstream.

As Bitcoin is the oldest and most popular cryptocurrency, the article focuses on the purchase of Bitcoin, but most exchanges do offer other altcoins as well for purchase. Therefore, if you are looking for information for buying Bitcoin in the UK, long no further, just simply read on. Do not worry if you are new to Bitcoin and do not exactly grasp all the principles and technology that underpin this digital asset class. This being said, before you proceed with any plans to buy Bitcoin, bear in mind that it is a highly volatile asset and when investing in it, it is possible that you may lose money, as with any other type of investment. Also, be aware that the information below is mostly geared towards individuals who do not wish to buy large amounts of Bitcoin or those whose sole purpose is trading, as such endeavours are better executed in Over The Counter, more secure settings.

This mini guide is part of the How to Buy Crypto and Bitcoin - Investing in CryptoCurrency Section, which breaks down all the elements involved in buying cryptocurrencies so you can make an informed decision.

Why buy bitcoin in the UK?

As already stated above, Bitcoin is really popular in the UK, however besides the obvious answer that people in the UK are buying Bitcoin because they can, in reality there are numerous valid reasons why buying Bitcoin in the UK is a good idea.

First is the fact that as an asset Bitcoin is highly speculative and the faster growing asset of the past decade, meaning that profit making opportunities are enhanced for Bitcoin transactions.

The second is that due to its fixed cap supply, Bitcoin cannot be inflated like for example the GBP can and thus cannot lose its value due to inflation. Therefore, holding Bitcoin can be viewed as a hedge against centrally imposed monetary policies. Others buy Bitcoin, much for the same reasons why they buy gold, and many who first started buying Bitcoins in order to quickly resell them and make profits, do in fact decide to hold on to their Bitcoins due to the digital currency’s sound monetary properties and perhaps looking forward to a future where Bitcoin will be the primary currency of the internet, or even the currency of the world! Who knows, maybe one day!

Is buying Bitcoin in the UK legal?

While for a long time Bitcoin was considered the main currency used in the so-called dark markets, and though this may still be true to an extent, buying Bitcoin in the UK is completely legal and this is why many UK residents engage in the buying and selling and holding of Bitcoins. At the time, there is no wider or specific legislation in the UK dealing with cryptocurrencies and this allows the market to remain fairly liberal. However, Bitcoin and other cryptocurrencies are not classed as legal tender in the UK, but are classified as property instead. Crypto-currency exchanges are regulated under the Financial and must comply with AML and KYC regulations, rendering the purchase of crypto through such exchanges more reliable and stable.

Is buying Bitcoin in the UK taxable?

Though there has been talk by the Bank of England for the introduction of cryptocurrency specific regulations, this has not yet materialised, though it is highly like to happen in the future. Therefore, currently you are not liable to paying any tax when buying Bitcoin in the UK, but may incur taxation when you sell Bitcoins in your possession. Since cryptocurrencies are classed as property (i.e. as assets) in Britain, when you sell crypto you will have to pay capital gains tax on any crypto-trading profits above the £12,000 threshold. More specifically, a basic-rate income taxpayer (i.e. earning income between £12,501 and £50,000), should pay 10% on any capital gains profit beyond £12,000, while higher rate income taxpayers (i.e. those earning between £50,001 and £150,000), have to pay 20% on any capital gains. Likewise, income tax is also chargeable if you receive cryptos as payment for any goods sold and/or services rendered.

What’s the Cheapest and Easiest Way to Buy Cryptocurrency in the UK?

Generally speaking, the cheapest way of buying cryptocurrency in the UK is through using a crypto-exchange and this is also the easiest and most convenient way as well. Perhaps an exception in terms of convenience would also be purchasing Bitcoin at a Bitcoin ATM, but those are not readily available for all, unless you happen to live in Manchester, Leeds, Liverpool and Glasgow.

Besides the numerous, reputable and credible crypto exchanges that are actually based in the UK, UK-based customers can also choose amongst the best international exchanges as well, such as Coinbase, Kraken, and Binance, since they all accept clients from the UK. Beginners in the purchase of Bitcoins and cryptocurrencies in general should keep in mind that some exchanges, such as the UK-based CEX.io, allow the direct purchasing of cryptocurrencies through the use of a debit or credit card, while other exchanges require clients to first open an account and fund that account by depositing fiat currency, e.g. GBP, USD or EUR, and then proceed to trade the fiat currency for Bitcoin or other cryptocurrencies available for purchasing.

How Easy is it to Buy Crypto in the United Kingdom?

Since you have many cryptocurrency exchanges to choose from, buying crypto, and especially Bitcoin, in the UK is indeed easy. Once you choose your preferred exchange and open an account with them the actual transactions are run very smoothly. Simply remember that during the account opening process you need to complete various procedures for compliance with Know Your Client and Anti-Money-Laundering requirements that exchanges need to abide by. Such procedures will require you to upload proof of identity using some sort of photo id document.

Is it possible to also sell Bitcoin in the UK?

If you are a UK resident, you cannot only buy Bitcoin, but you may also sell it and trade it with other assets, either other cryptocurrencies or other fiat currencies. If your current crypto-currency exchange does not offer such services, you can always transfer your bought Bitcoins into another account with a different exchange that enables you to trade your Bitcoin with other assets. If, however, you choose to sell your Bitcoin back to the exchange and have the value returned to your bank card used to make the original payment this may also be possible, subject to certain fees and conditions.

Do UK Banks allow the Purchase of Bitcoin with a Credit Card?

The short answer is that it depends which bank you are banking with as not all UK banking institutions follow the same policy on this. Credit card usage for the purchasing of Bitcoins is somewhat trickier, as many banks do not allow it. Since early 2018, the Lloyds Banking Group, comprising Lloyds Bank, Halifax, Bank of Scotland, and MBNA, has stopped allowing their customers to use their credit cards to buy Bitcoins and other cryptocurrencies. The same ban was also adopted by Virgin Money and Capital One. also ban customers from using credit cards to purchase crypto.

There are however, other major banks, such as Barclays, HSBC, and NatWest, whose customers are still allowed to use their credit cards in order to buy Bitcoins and other cryptocurrencies.

The good news is that all major UK banks, including those of the Lloyds Group, as well as Capital One and Virgin Money, do allow customers to purchase cryptocurrencies using their debit cards, which is an instant and very convenient method.

Buying bitcoin in the UK using an exchange

With many kinds of crypto exchanges around, discerning which one to choose may be a confusing task. Remember that the best crypto exchange for our own needs might not be the best one for those of the next person, since day traders for example, who rely heavily on the speed of the transaction execution, have much different needs than casual, one-time investors.

Before choosing which exchange to use for buying Bitcoin therefore, you need to identify your own needs and requirements first in order to be able to best match them with the actual offering of each crypto exchange.

The fees charged should not be your only consideration when choosing from which exchange to buy Bitcoin in the UK, but nevertheless you should aim to get the most competitively priced service possible. To achieve this, seek for exchanges that can take advantage of the cost efficiencies created by in-house solutions and less dependence on third-party providers, as well as excellent integration with Over The Counter providers and greatest access to liquidity providers, as all these allow the more competitive pricing of the fees you will be charged.

Besides the fee, when choosing an exchange also look into and compare their speed and convenience of use, their verification process and how long it takes, what payment methods they accept and whether besides buying Bitcoin it is also possible to sell it back too. Your due diligence process when deciding which crypto exchange to select, also examine their past track record and the reputation they enjoy, while depending on what you want to do after buying your Bitcoins, check if auto-investing into Bitcoin is included in the exchange’s offering, or whether it is easy to convert your Bitcoin back into GBP at any time and without complex processes or high fees.

Payment method options for buying Bitcoin in the UK

The payment method options that are usually accepted by most crypto exchanges when buying Bitcoins in the UK are bank transfer, debit card and credit card, while an increasing number of exchanges have also started to accept Paypal payments as well, though this is not as widespread yet. However, being able to use your debit or credit card does not only depend on the exchange accepting, but your card provider allows it as well. As mentioned above many banks completely forbid this for all card types, while others allow the use of debit cards, but not credit cards. Even in the cases where credit card use is allowed, this is subject to higher fees, as it is often considered as a cash advance, and it is also riskier because you are buying on credit, i.e. using money you don’t actually have, which could lead to greater losses in case there is a sudden decrease in the value of the Bitcoins purchased via credit card.

If using a debit or credit card to purchase Bitcoin from any exchange in the UK, make sure you set GBP as your selected payment currency, as, if you fail to do so, most banks will charge your card with a non-sterling transaction fee, as well as a non-sterling payment fee, which you will have to foot on top of the fee already charged by the exchange for paying with a card.

While paying for your Bitcoin with a UK bank transfer will ensure you get more competitive prices, card payments are more convenient and usually much faster, even when banks process the transaction via the Faster Payments Service (FPS).

Recommended ways to buy bitcoin

As stated, there are different exchanges available depending on what you need. There are peer to peer exchanges, exchanges that act as the middleman between you and other peers, and centralized exchanges that buy and sell directly. The latter are usually more secure, but always require proof of ID for verification purposes, while they usually impose limits on how much you can purchase per week, though this is not necessarily bad, especially for small scale buyers, as it allows one to ride the market’s highs and lows.

After purchasing storage

A Bitcoin wallet is necessary to store your Bitcoins securely after you buy them and though exchanges offer you one, it is best to have your own and transfer your Bitcoins there once the purchasing transaction is completed. This will allow you better safety and security and ensure you are in control of your coins, since you will be the only one with access to it through the provided “key”. Leaving your Bitcoins in the “custody” of a third party would technically mean that you don’t own them.

When it comes to wallets you can opt for a software wallet that you can download on your desktop, tablet or mobile or a hardware wallet, which is a physical device, similar to a USB, that you can connect to your computer when wanting to buy, sell or transfer your Bitcoins.

The choice is up to you, but while software wallets are more convenient, hardware wallets are significantly more secure, but also more expensive. If you only hold 100 GBP’s worth of Bitcoin it is hardly worth it to spend 70 GBP for a hardware wallet to store it in, but if you are buying Bitcoin to hold on to it and plan to increase your coins, then perhaps it would be wisest to invent in a reliable hardware wallet for its storage.

On privacy and security

As crypto exchanges and crypto transactions in general are due to their nature always under attack by hackers, you should ensure that when buying Bitcoins your privacy and security are not compromised. To achieve this, here are a few smart tips:

  • Mask your IP address through the use of a virtual private network (VPN), to prevent hackers from identifying you or knowing your location.
  • Do not browse through the popular browsers, but use a privacy browser, for example Brave, or any browser that does not incorporate the tracking software that usual web browsers do.
  • Always use unique passwords that are complex and long and thus difficult to guess, but make sure you remember them! Keep your passwords secure through a password manager if necessary.
  • Turn on two-factor authentication that is provided by most Bitcoin transaction services, as this will provide you with an additional security layer every time you log in to make a transaction.

Conclusion

In a nutshell, if you are a UK resident wishing to buy Bitcoins you are in luck because the market is accessible and liberal and there are several choices, especially in the form of crypto-exchanges, that you can resort to in order to make the purchase. What is needed is simply selecting the exchange that is best for you, taking into account several factors, including its credibility and good reputation, as well as the fees charged and the payment methods accepted. The process is easy and you should have no trouble getting your hands on some hot Bitcoins, but please remember to also ensure their safekeeping after the purchase!

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