UK investors buying Strategy’s STRC preferred stock may face significantly higher taxes than expected, as distributions are treated as dividends rather than tax-deferred returns.
The Bitcoin-backed yield product offers around 11.5% annual returns, but UK tax rules mean investors could pay up to 39.35% income tax on payouts plus capital gains tax on sale.
“If you are buying STRC in the UK, it is a lot more tax efficient to buy it via the 21Shares ETP… gains on sale are generally subject only to Capital Gains Tax,”
Analyst James Van Straten said.
Unlike in the US, where STRC distributions are classified as return of capital and not immediately taxed, UK platforms treat them as taxable foreign income.
An alternative is the 21Shares Strategy Yield ETP, which reinvests income and is typically taxed only on disposal, avoiding ongoing income tax liability.
Investors can also eliminate tax exposure entirely by holding either product within a Stocks and Shares ISA, subject to annual contribution limits.
The situation highlights how tax treatment can materially impact returns, with investors advised to consider structure, jurisdiction and personal tax status before investing.
At the time of reporting, Bitcoin price was $67,915.40.