The Lowdown Hub

How to add Bitcoin to your Isa and profit tax-free crypto investors can end up with large capital.


Bitcoin launched in 2009 and is the most prominent cryptocurrency

Advocates of cryptocurrencies argue that over the long term, prices will go higher due to a limited supply of tokens and an increase in demand as more and more companies and investors move to embrace digital money. Bitcoin is the original and still the most important cryptocurrency, but it cannot be owned directly in traditional tax-efficient accounts such as Isa and pensions. Gains made outside of such accounts are liable for capital gains tax which could eat up 10-20pc of the profits after a £12,300 allowance.

There are, however, a number of ways investors can track the value of Bitcoin and other cryptocurrencies via Isas and pensions. Telegraph Money takes you through the best options.

Argo Blockchain.

Bitcoin is “mined” by computers solving complex calculations which get gradually harder over time. There are currently 18.5m Bitcoins in circulation and the final ones are expected to be mined in 2140, meaning that there is still plenty of time for companies involved in the process to make a lot of money.

Argo Blockchain, listed on the London Stock Exchange, owns 16,000 computers working on these calculations. In 2020, it mined 2,465 Bitcoins. The share price has over 280pc this year alone.



KR1

KR1 is a £190m cryptocurrency investment firm that owns 35 different digital coins, including well-known ones Bitcoin and Ethereum, as well as newer options such as Polkadot, Cosmos, and Dfinity. Owning KR1 shares is a way of owning a spread of different cryptocurrencies inside an Isa or Sipp.


Its share price has risen from 25p to 160p this year, a six-fold increase.


Elwood Blockchain Global Equity ETF


This ETF, which has the stock market ticker BCHS, from American fund manager Invesco tracks a basket of companies deemed to have the “potential to participate in the blockchain ecosystem”.


Blockchain is the technology that underpins the Bitcoin network and allows transactions to take place.


This means the ETF owns companies directly involved in blockchain technology, as well as businesses with large cryptocurrency assets, such as MicroStrategy, an American software business that recently bought billions of dollars worth of Bitcoin.


It also owns big technology companies, such as Taiwan Semiconductor Manufacturing.

The £760m ETF charges 0.65pc and has risen 20pc in value in the past year.


  • Capital Gains Tax – a brief history

  • 1965 – James Callaghan, then Chancellor, introduced CGT of 30 percent to stop people avoiding income tax by switching their income into capital. A threshold of £9,500 was set 1982 – With inflation rocketing to 21 per cent during the early 1980s, the Chancellor Geoffrey Howe, introduces indexation. This allowed people to strip out the benefit of inflation when calculating how much tax to pay on profits 1988 – Income tax for high-rate taxpayers was lowered from 60 per cent to 40 per cent, and for basic rate payers from 30 per cent to 25 per cent. CGT rates followed suit, with these dual rates introduced, with a threshold lowered to £5,000 1997 – The CGT threshold, which had slowly crept up over time, hit £6,500 in the last tax year of the chancellorship of Kenneth Clarke 1998 – In Gordon Brown's first budget he replaces indexation with taper relief. The longer you held the asset, the lower the rate of tax you paid on it. If you had owned an asset for 10 years, the rate fell from 40 per cent to 24 per cent 2002 – The threshold continues to creep up. By this year it hits £7,700 2008 – Major reform. In Alistair Darling's first budget he scraps the dual rate of CGT and introduces a new lower, single rate of 18 per cent. But he scraps taper relief 2009 – The threshold climbs above £10,000 for the first time, exempting the first £10,100 of any profit from tax 2010 – The Liberal Democrats in their manifesto promise that they will "tax capital gains at the same rates as income, so that all the money you make is taxed in the same way". This implied 18 per cent would be raised to 20 per cent, 40 per cent and 50 per cent depending on your tax bracket 2010 – The Conservative Manifesto does not mention any changes to Capital Gains Tax



Coinbase shares

British investors can buy shares in Coinbase, one of the world's biggest cryptocurrency exchanges. It offers a wide range of tokens, including Bitcoin, Dogecoin, and Ethereum.

A higher Bitcoin price means more trading, which is good for Coinbase. It charges a flat fee for trades and a percentage fee for conversions between coins.



Read more: 'My Bitcoin investment multiplied by ten in just two years - there's only one catch’