Buying bitcoin in the UK has never been easier and if you’re looking to buy some yourself this article is for you.
Buying bitcoin in 2021 gets easier each year with new services that make the buying, selling and earning process easier, particularly as the price continues to increase.
That said, bitcoin is an entirely new asset class and genuinely a first of its kind which requires a decent understanding of the principles and technology that underpin it.
In this article you’ll learn how to buy bitcoin in the UK using a service that allows you to invest in bitcoin using British pound sterling.
If you want to go straight to where to buy bitcoin in the UK click here to scroll down the page.
Read on further if you want to know why you should buy bitcoin in the first place.
I’ll assume a couple of things: First, I’ll assume you’re new to bitcoin and have never bought it before and second, I’ll assume you’re treating bitcoin as a medium to long term investment.
Also, there are many other cryptocurrencies on the market. In the bitcoin industry we call those sh*tcoins.
This article is about bitcoin and bitcoin only which is the first, biggest and by far the best of all them.
Why buy bitcoin in the UK?
People in the UK and around the world buy bitcoin for a number of different reasons. Some of which include:
- It’s a hedge against the Bank of England monetary policy. Bitcoin has a fixed cap supply meaning it can’t be inflated unlike the British pound (and every other world currency including the US dollar) which has lost most of its value due to inflation
- The future of money. Many bitcoiners believe it will be the currency of the world in the future which is called hyperbitcoinization. Twitter and Square founder, Jack Dorsey believes bitcoin will be the currency of the internet
- It’s a speculative asset. Bitcoin is the fastest growing asset over the last ten years as you can see in the table of its yearly returns
Is it legal to invest in bitcoin in the UK?
Yes it is absolutely legal to buy bitcoin in the UK.
Bitcoin tends to get associated with being the main currency of the dark markets which is untrue. The vast majority of people who own bitcoin use it legally.
The irony is, the US dollar and British pound are used for illegal means much more than bitcoin ever is or will be.
Buying bitcoin in the UK is completely and totally legal.
Do you pay UK tax on a bitcoin investment?
You don’t have to pay tax when you invest in bitcoin in the UK but you may have to if you ever sell it.
Former Bank of England governor, Mark Carney, said in 2018 that cryptocurrency regulation in the UK was planned but so far nothing has happened.
While it’s likely that cryptocurrencies like bitcoin will face the same regulation as any asset the Bank of England is generally pro the idea of them.
Bitcoin (and crypto) traders who buy and sell regularly as if they’re running a business will likely have to pay tax but for you, as a long term holder, you won’t have to on your UK bitcoin investment.
When, or if, you come to sell it will likely go towards your tax-free capital gains tax allowance which in 2020 is £12,000 but likely to be more in years to come.
In short, buying bitcoin in the UK is not taxable but selling it in the future may likely be.
Some people plan to never sell their bitcoin. They instead believe that the price will rise so much that they can just get loans against it.
They believe their bitcoin will rise in value more than a loan’s interest. If past performance is anything to go by they won’t be wrong.
Buying bitcoin using an exchange
Remember: You don’t have to buy a full bitcoin and instead you can buy a smaller amount. Each bitcoin is divisible up to 100 million satoshis (like how £1 is divisible up of 100 pennies) so you can buy as much or as little as you like
The main way to buy bitcoin in the UK is through an exchange.
An exchange is essentially a marketplace where you can buy and sell bitcoin (and other cryptocurrencies).
There are various types of bitcoin exchanges you can use. Some are catered to day traders where buying and selling quickly is a necessity. Others are more suited to the long-term investor.
As a side-note, the vast majority of day traders lose. Long term investors tend to win big on a longer timeline.
Some exchanges are internationally focussed with users all around the world whereas others are specific to the country they are domiciled in.
It’s important you do your due diligence when choosing a bitcoin exchange.
Where to buy bitcoin is an important part of the journey.
It’s also important to note that you should not buy bitcoin from Revolut. This is because you’re not actually buying bitcoin, you’re buying an IOU on it.
You can’t remove your bitcoin from the Revolut app and withdraw it to your own wallet.
This is why you need to use a good exchange that you can withdraw it from.
When choosing a bitcoin exchange you should always consider the following:
- How long has it been operating and does it have a good reputation?
- Is it easy to purchase bitcoin using the exchange?
- What payment methods do they accept to buy bitcoin?
- Does it include an option where you can auto-invest each week or month?
- Is it easy to sell bitcoin and convert it back to cash?
- What documents do they require you to submit to prove your identity?
- What fees does it charge you to buy (and sell) bitcoin?
Recommended way to buy bitcoin
As I mentioned earlier, buying bitcoin in the UK has never been easier as new services launch to help people make their first bitcoin purchase.
Some of these companies are better than others, however, and there have been instances in the past where people have either been scammed from a dodgy exchange or it was hacked along with the bitcoin.
You must use a safe and secure exchange with a long track record and an excellent reputation.
That’s why I recommend you use Coinmama.
Coinmama – coinmama.com
Coinmama is a bitcoin exchange that has been around since 2013 which is a long time in bitcoin years.
The service is easy-to-use, secure and has a helpful customer support. Coinmama fits all the criteria I’ve outlined above.
With Coinmama, you can use your debit card, credit card or Apple Pay to buy bitcoin (and other cryptocurrencies) directly from the company in seconds.
Once you’ve signed up and provided your ID verification you’ll be ready to buy bitcoin straight away. With their quick turn-around, it’s the easiest and fastest way to buy bitcoin in the UK.
Some cryptocurrency exchanges can be very confusing to a novice bitcoin investor because they are more catered to seasoned day traders.
Their admin dashboards are full of read and green charts and graphs moving every second.
Thankfully, Coinmama is an easy-to-use platform catered to the more long-term bitcoin investor like me.
Their customer service is second to none which provides peace of mind.
Before buying bitcoin consider the payment method which you’ll use. With Coinmama you have the following options:
- Bank transfer
- Debit card
- Credit card
- Apple Pay
Bank transfer or debit card are the two main payment methods to buy bitcoin in the UK but as you can see above Coinmama makes it easy to use additional methods such as a credit card and Apple Pay.
Choosing a wallet to store your bitcoin
When you begin your bitcoin investing journey and make a purchase you need to store it somewhere.
Once you’ve bought your bitcoin from Coinmama, you need to send to your wallet for safe keeping.
Owning bitcoin is about self-sovereignty so you need to have self-custody of it rather than depend on a third-party to hold it.
When you use your own bitcoin wallet you own the ‘keys’ to your bitcoin.
If you leave it up to an exchange to keep your bitcoin you technically don’t own it.
“Not your keys not your coin” is a common mantra in the bitcoin community. You must keep hold of your own bitcoin.
There are two types of wallets you can use.
Software wallet. This is a wallet you download to your computer and/or phone.
Hardware wallet. This is a physical device which connects to a computer and/or phone.
The main benefit of using a software wallet is convenience. The main benefit of using a hardware wallet is greater security.
You should never keep a lot of bitcoin on a software wallet and should always store it on a hardware wallet long term.
The hardware wallet I use and recommend is Coldcard which I’ve written about its security features before.
The software wallet I use and recommend is BlueWallet which I’ve written about is ease of use before.
BlueWallet is free and you can download it straight away. Coldcard is paid for and it’s shipped over from Canada (I don’t recommend buying a hardware wallet from Amazon as they can be tampered with).
Remember: When setting up your wallet you must remember to write the seed phrases it gives you.
That way, if you lose the wallet you can retrieve the bitcoin.
There have been many instances of people who didn’t take care of their wallet only to find some years later the bitcoin stored on it that they paid £50 for is now worth £50,000 but they can’t access it.
Privacy and security tips
When buying bitcoin (or even just using the internet) you should follow a good privacy and security protocol.
Here are some privacy and security tips to help you.
Self custody your bitcoin – Remember ‘not your keys not your coin’. Own them and take care of them
Never enter your keys online – There are a lot of crafty scammers out there that trick you into giving them your bitcoin by pretending to be a wallet provider or some other service. Once you give them your private keys wave goodbye to your bitcoin
Use an email specific for your bitcoin – If you plan to own a lot of bitcoin it’s good practice to have a specific email address specific for it
Use a VPN – A virtual private network will mask your IP address so hackers can’t identify you and your location
Ditch Chrome – Use a privacy browser like Brave which is just like Chrome except it doesn’t include all the tracking software Chrome uses to track you
Have good password hygiene – Always use long, complex and unique passwords, and use a password manager to keep them secure
Turn on two-factor authentication – Most bitcoin services include 2FA these days which provides an additional security layer when logging into them