How to Invest in Bitcoin in the UK

Investing in Bitcoin is easy and can be done in a few simple steps:

1. Find a reputable crypto exchange that has the features you want
2. Add money to your account through your preferred method
3. Buy your bitcoin and store it in a digital wallet
4. Manage your investment and track the price of Bitcoin

Bitcoin is by far and away the most renowned cryptocurrency in the world. Since its inception in 2009, it has become increasingly attractive as an investment opportunity. It has the promise of substantial returns and those in the UK can easily invest in the coin.

Before investing in Bitcoin, it’s important to know how it can be done, what the best platforms are and what the risks are. Here we'll give you all the information you need while also answering some key frequently asked questions. Read on to find out more.

An Overview of Investing in Bitcoin

Bitcoin was launched in 2009 and since then, it has become synonymous with cryptocurrency. For many casual observers, it’s the only cryptocurrency they can name. That in itself can give Bitcoin a huge amount of appeal and has led to a market capitalisation of around £268 billion.

Investors love Bitcoin for a wide range of reasons but mainly for its high returns and diversification benefits. The currency is famous for its incredible appreciation over time, which was particularly lucrative to those who bought into the coin early on. Since then, investors have hoped for their own slice of fortune.

Another reason why Bitcoin has become increasingly attractive to investors is that cryptocurrencies have started to gain wider acceptance as a genuine currency and investment option. Their decentralised ledger drew scepticism at first but is now appreciated for its transparency and security.

That decentralised nature means that the coin can exist without the use of central banks and without input from any government. This allows it to sit outside any of the pressures that can come from authorities, while also having more privacy and reduced transaction costs.

Furthermore, the scarcity of Bitcoin also adds to its appeal when it comes to bitcoins as an investment. The coins have a cap of 21 million, which can't be altered due to the coin's source code. Due to this, investors can have more security knowing that there is only a finite amount of the coin.

While Bitcoin investing UK is attractive, it isn't without its risks. The crypto market is highly volatile, with rapidly fluctuating prices. You need to have the courage and patience to understand that the value of your investment can swing quite wildly.

For those who want to invest in Bitcoin, the lure of potential rapid price rises can be very appealing. However, before investing in Bitcoin UK, it’s wise to look at the history of its price changes so you can be more informed about whether or not you should invest in Bitcoin UK.

What Is the Difference Between Buying and Investing in Bitcoin?

The terms 'buying' and 'investing' in Bitcoin are often used interchangeably, but they represent different approaches to acquiring and holding the cryptocurrency.

Let's explore the differences between buying and investing in Bitcoin:

Buying Bitcoin

'Buying' Bitcoin refers to the act of purchasing the cryptocurrency with the intention of using it for various purposes, such as transactions, online purchases or sending funds to others.

Essentially, it is acquiring Bitcoin as a form of digital currency to be used for day-to-day transactions.

Investing in Bitcoin

'Investing' in Bitcoin involves acquiring the cryptocurrency with the primary objective of holding it as a long-term asset for potential capital appreciation. Investors view Bitcoin as a store of value and a speculative investment that may provide returns over time as its value increases.

Key Differences

• Purpose – The primary purpose of buying Bitcoin is to use it as a means of exchange for goods and services, similar to traditional currencies. On the other hand, investing in Bitcoin is a strategic decision aimed at holding the asset for potential long-term returns, much like investing in other assets like stocks or real estate.

• Time Horizon – Buying Bitcoin for transactional purposes typically involves short-term use, as the cryptocurrency is spent relatively quickly in various transactions. Investing in Bitcoin, however, has a longer time horizon, with investors typically looking to hold the asset for an extended period to benefit from potential price appreciation.

• Risk Profile – The risk associated with buying Bitcoin for transactions is limited to the transaction itself. If the value of Bitcoin fluctuates between the time of purchase and transaction, it may affect the cost of the purchase slightly. On the other hand, investing in Bitcoin involves exposure to higher market risks, as the cryptocurrency's price can be volatile and subject to significant fluctuations.

• Investment Strategy – Investing in Bitcoin requires a more deliberate investment strategy, including considerations of risk tolerance, portfolio diversification, and potential allocation to other asset classes. Buying Bitcoin for transactions does not require a specific investment strategy, as it serves more as a medium of exchange.

Best Bitcoin Platforms

Now you know the steps you should be taking when it comes to how to invest in Bitcoin UK, what exchange should you pick to buy your first bitcoin?

Let’s take a look at five of the best options out there.

Fees: 0.5% fee on GBP deposits, 1% fee for buying Bitcoin plus market spread

eToro is a user-friendly platform that allows easy buying and selling of Bitcoin. It offers a social trading feature, allowing users to follow and copy successful traders. The platform also provides a wide range of other cryptocurrencies to trade.

However, eToro charges relatively higher fees compared to other platforms. Additionally, the withdrawal process can sometimes be slower than expected.

76% of eToro retail CFD accounts lose money. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.

Fees: 3.99% debit card fee, 1.49% buying fee

Coinbase is a reputable and popular platform known for its user-friendly interface and strong security measures. It supports multiple cryptocurrencies, including Bitcoin, and offers an intuitive mobile app for convenient trading on the go.

While a respected exchange, it has been criticized for occasionally experiencing downtime during periods of high market activity. The fees can also be relatively high, particularly for buying with debit cards.

Coinbase: Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take two mins to learn more.

Best for: Diverse asset support
Type: App & web

Uphold stands out as a top choice for purchasing Bitcoin and other cryptocurrencies in the UK.

With over 10 million users spanning 150 countries, Uphold makes buying, trading, and storing assets, including Bitcoin and 250+ other cryptocurrencies, simple and secure. Uphold prioritizes safety and transparency, operating on a 100% reserve model to hold user funds securely.

Additionally, the platform regularly updates real-time asset and liability data, accessible to the public every 30 seconds, ensuring transparency.

Fees: 0% to 2% deposit fees, 0.020% to 0.10% trading fees

CoinJar is a UK-based platform that offers a simple and intuitive interface, making it easy for beginners to buy and sell Bitcoin.

It provides a mobile app for convenient trading and offers additional features like a cryptocurrency debit card.

However, the range of supported cryptocurrencies may also be more limited. Also, some users can be frustrated by the longer withdrawal times.

How Has the Price of Bitcoin Changed Over the Years?

As mentioned, the price of Bitcoin has changed dramatically since its inception.

Before we look at the best way to invest in Bitcoin, it’s important to know what you're letting yourself in for. This will never be an investment for the faint-hearted.

Shortly after its inception in 2010, the price of one bitcoin was only a fraction of a penny and very few people had heard of cryptocurrencies. Many of us wish we had known about Bitcoin at the time, but that opportunity is long gone.

Over the next few years, the price of Bitcoin steadily rose, with a significant jump in 2013. At this time, the price of one coin went to over £100. The coin was establishing itself as an alternative to regular currency and more and more people were wondering how to invest in bitcoins.

The price kept rising again, with another huge jump in value happening in 2017. By the end of the year, one bitcoin rose to a value of £15,000. The attention the coin received went to a whole new level and all of a sudden, it felt as though everyone knew about cryptocurrencies. Both experienced investors and complete beginners were drawn toward the coin.

Soon after that, the price of Bitcoin fell and many thought that the coin was on its way down. A year later in December 2018 the value was barely over £2,500. It recovered to around £8,000 by October 2020, and then increased dramatically.

By March 2021, the value had risen to over £40,000, then dropped to around £25,000 in May of the same year. Another boom would soon follow that included Bitcoin’s highest ever value of £48,000 in November 2021.

Since then, there have been many peaks and troughs in the value of the coin. That has led us to the present day when the value sits at a little over £20,000. As of the 10th of June 2023, the price of Bitcoin in the UK is £20,485.02.

The volatility is there for everyone to see. The price can change rapidly and with that comes an obvious risk. There are many who would have invested in Bitcoin during one of its rapid rises only to be stung when the value fell back down. When it comes to Bitcoin investment UK, it’s always wise to understand what you’re entering into before making any decisions.

For those wondering how to invest in bitcoins, the process is straightforward. Below are the steps of how to invest in Bitcoin.

Will I Have to Pay Tax on My Bitcoin Investment in the UK?

Investing in Bitcoin in the UK can have tax implications, as cryptocurrency profits are considered taxable assets. It's important to understand the tax obligations associated with your Bitcoin investment to ensure compliance with HMRC regulations.

With Bitcoin, there can be many different taxable ‘events’, which just means any type of action or transaction that can mean there is money owed. Buying and owning Bitcoin is not seen as a taxable event, but profiting from it can be.

In the UK, you can be liable to pay what's called Capital Gains Tax. This is a tax placed on the profit from any asset. The most obvious example of this is when you sell a second property that isn't your main home for a large profit.

There are a few different ways Capital Gains Tax can be due in relation to Bitcoin. These include selling your tokens, exchanging them for another crypto asset, using them for goods/services or gifting them to someone else.

As stated, it’s important to note that you’re only taxed on the profits. For example, if you buy £10,000 worth of Bitcoin but sell those tokens for £8,000, you’d have no tax to pay as you would have lost money.

If you’re using Bitcoin for goods or services, then it may be subject to income tax. The value of the Bitcoin received should be converted to its equivalent in fiat currency (Pound Sterling) at the time of the transaction for tax purposes.

HMRC has issued guidelines and regulations regarding cryptocurrency taxation. It considers each case individually and looks at the specific facts and circumstances. HMRC treats cryptocurrencies as assets and they are subject to Capital Gains Tax or income tax depending on the nature of the transaction.

The exact amount you pay can vary depending on your income. There are also a range of exemptions and exclusions that can alter your taxable amount. Due to this, it’s always recommended to seek professional advice from a qualified tax advisor or accountant experienced in cryptocurrency taxation.

They can provide guidance tailored to your specific situation, help you calculate and report your tax liabilities correctly and keep you updated on any changes in regulations.

What Are the Main Risks to Consider When Investing in Bitcoin?

When looking at how to invest in Bitcoin UK, it’s vital that you understand the risks associated with it. Here’s everything that you need to consider.

High Volatility

Bitcoin is known for its high volatility, which means its price can experience significant fluctuations within short periods. Various factors can influence Bitcoin's price, including market demand, investor sentiment and regulatory developments. You should be prepared for rapid and unpredictable price changes.

Regulatory and Legal Risks

The regulatory landscape surrounding cryptocurrencies, including Bitcoin, is still evolving and subject to change. Governments and regulatory authorities may introduce new regulations or policies that could impact the use, trading or taxation of cryptocurrencies.

It’s important to stay updated on the latest regulations and be aware of the potential legal risks associated with investing in Bitcoin.

Security Risks and Scams

Storing and securing bitcoins comes with risks. Bitcoins can be vulnerable to hacking, theft or loss if you don’t have proper security measures. It's crucial to use reputable cryptocurrency exchanges and secure digital wallets to protect against potential security breaches.

Frequently Asked Questions

Final Thoughts

Bitcoin is an exciting investment opportunity for anyone in the UK. Hopefully by now you know the answer to the question of how do I invest in Bitcoin UK. It’s a simple process with the first step being to find an exchange.

Once you do so, then you can decide on how much to invest in Bitcoin and then manage that investment through your digital wallet. Remember, the price of Bitcoin is volatile and it’s important to appreciate the risks before deciding to invest.

WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.