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 isn’t difficult and it’s getting easier each year as new services are launched to make the process easier and becomes more mainstream as the price increases.
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 services that allow you to exchange bitcoin for British pound sterling.
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. Some have potential whereas others are pretty much scams. 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 around the world buy bitcoin for a number of different reasons. Some of which include:
- It’s a speculative asset. Bitcoin is the fastest growing asset over the last ten years. Indeed, if you bought bitcoin just six months ago you’d be up on your investment by 200%
- 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 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
Much like why people buy gold in the UK, buying bitcoin is no different.
There’s a meme in the bitcoin community which suggests most people get into bitcoin to make money but tend to stay in the space once they understand its sound monetary properties.
Indeed, bitcoin is deflationary whereas technology is inflationary.
The image below shows the price of an iPhone 4 in bitcoin in 2010 was much compared with buying an iPhone 12 Max Pro today despite it being a much more technologically advanced phone.
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 when you come to 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 materialised.
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. My personal thesis is, I don’t ever intend to sell it therefore I’ll never pay tax on it.
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 usually win 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. To help you I’ve provided a recommended exchange below.
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 own your own wallet you own the ‘keys’ to your bitcoin. If you leave it up to a third party service like an exchange to keep your bitcoin you technically don’t own them.
“Not your keys not your coin” is a common mantra in the bitcoin community.
There are different selection 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 to buy, sell or move your bitcoin.
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 substantial amount of bitcoin on a software wallet and should always store it on a hardware wallet.
There are two software wallets I recommend to store your bitcoin. Over time, as you buy more and become more familiar with bitcoin, you might want to change to a hardware wallet but these two are great for entry level and day-to-day use.
Although both are named after colours they are made entirely by different companies. Nevertheless both are well-respected wallet companies in the bitcoin space. Both are free to use also. I prefer Blue Wallet over Green Wallet but you decide what works best for you.
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.
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