Buying bitcoin in the UK has never been easier and if you’re new to it and looking to buy some yourself this article might be for you.
Buying bitcoin isn’t difficult and it’s becoming easier as more mainstream and new services launch each year.
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 three things: First, that you’re new to bitcoin and have never bought it before. Second that you’re not planning to buy a large amount which requires a more secure approach. Finally, you’re not trading it and intend to hold on to it for a relatively long time.
Also, there are many other cryptocurrencies on the market. Some are good, others are terrible. This article is about bitcoin which was the first, original and by far the biggest 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
- 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.
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 and while true many more people buy and hold it for the reasons mentioned earlier.
Buying bitcoin in the UK is completely and totally legal.
Do you pay tax on UK bitcoin purchases?
You don’t have to pay tax when you invest in bitcoin in the UK but you may have to pay tax 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, dear long term holder, you won’t have to on your UK bitcoin purchases.
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.
So, in short, buying bitcoin in the UK is not taxable but selling it in the future will likely be.
Buying bitcoin using an exchange
Now that you have a wallet set up you can now receive bitcoin. The main way to buy bitcoin in the UK is through an exchange.
An exchange is essentially a marketplace where you can buy or sell bitcoin (and other cryptocurrencies). Remember that an exchange and wallet are not the same although some exchanges allow you to store your bitcoin with them, but as noted earlier this is unadvisable because: “Not your keys not your bitcoin.”
There are various kinds of bitcoin exchanges you can use. Some are catered mainly to day traders where buying and selling quickly is a necessity. Others are more suited to the casual investor.
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 and to do that you should 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 can you use?
- Does it include an option where you can auto-invest in bitcoin?
- Is it easy to sell bitcoin and convert 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 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 an 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.
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.
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 casual bitcoin investor like me.
Before buying bitcoin consider the payment method which you’ll use. You usually 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. Personally, I’m against using a credit card (and therefore using credit) to buy bitcoin but you do whatever works best for you.
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 to keep your bitcoin you technically don’t own them.
Not your keys not your bitcoin.
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 when making your first bitcoin purchase. Over time, as you buy more and become more familiar with bitcoin, you might want to change to a different one 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