Bitcoin investors who made huge gains when the cryptocurrency's value rocketed last year have been warned that they could unknowingly owe tax to HM Revenue and Customs (HMRC).
However, there is some confusion around the issue, as Ed Molyneux, the boss and co-founder of cloud accounting software provider FreeAgent, explains: "HMRC sees bitcoin profits being subject to capital gains tax, but there does not appear to be a definitive answer on the issue yet, which could cause confusion among investors."
It comes down to whether bitcoin is classified as an investment or a currency. Currencies are exempt from capital gains tax, but investments and commodities are not.
The HMRC said the treatment of income received from cryptocurrencies will be subject to tax based on the "activities and parties involved".
"Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts," the HMRC said.
Where bitcoin is held as an investment, any profit made by its disposal will be charged to capital gains tax, or if the person holding it is a company, corporation tax, it said.
It added that if someone trades in bitcoin very regularly they may be liable for income tax instead, but HMRC added: "We think this would be unusual - in most cases an individual disposing of a cryptocurrency will have held it as an investment will be taxed on gains and profits under the CGT rules."
Bitcoin's price shot up from around $1,000 to nearly $20,000 late last year. However it has since fallen back down to around $11,000 today.
The cryptocurrency is not the only developing issue that's shaking up self-assessment tax returns. Molyneux said earnings from the gig economy, like Airbnb rents, can trip people up as well.
Molyneux suggested individuals who have made money on bitcoin contact HMRC directly to check whether they need to include the information in their self-assessment tax return.