UK banksters have been notorious to stop Bitcoin activity as much as possible. Thanks to them there is no UK based exchange where you can directly purchase / sell your Bitcoins. You have to go through one of the brokers as myself and use peer to peer markets as they are called.
Lets have a closer look.
Peer to Peer markets (P2P Markets):
General caution apply in dealing on the peer to peer market!
Keep in mind that the person on the other side may have bad intentions! Always use service with escrow (all of the following markets have it) and never send money to anyone out of the marketplace. Doing this can easily get your money stolen!
Always choose the person with high reputation so the money involved would not be worth his account / reputation loss.
Do not think of the wallet on the marketplace as safe place to keep your coins on for longer period, always move coins to your outside wallet when you are done with trading.
ID verification is common practice when selling Bitcoins online on , so do not get freaked out when the seller will ask you for it!
LocalBitcoins - https://localbitcoins.com
LBC (short for LocalBitcoins) has been around for quite a few years and have proven itself as reliable platform. It offers good options for both buying and selling Bitcoins at reasonable rates in the UK. You can choose any payment method you prefer. If you have bank with faster payments (most of the high street bank) you will get Bitcoins within minutes! ID verification is usually required by all sellers when your reputation is low, be patient and provide it. Later you will find yourself able to buy/sell without it and at quite decent rates.
Pros: Wide range of Payment methods, Coins in minutes via UK faster payment, Government will not have your ID, Selling coins is fast&hassle free.
Cons: ID verification may be needed by different brokers, Interface is not as intuitive as BitBargain/Bittylicious, No altcoins.
BitBargain - https://bitbargain.co.uk
Option for very smooth buying in the UK. Verification is only required once and after you can purchase from all the merchants on the platform. Minimum of communication is needed. Once you start the trade you will get bank details of the seller, transfer money and in minutes you have the coins on your wallet. Interface is very clear and intuitive.
Pros: Only first time verification required. No communication required with the seller. Nice & Intuitive interface. LTC also available. Brokers well verified before allowed to sell.
Cons: No sell option
Bittylicious - https://bittylicious.com
Similar to the BitBargain, but you don't get to choose the broker. System is connecting the brokers to you automatically. Overall very easy and intuitive way to purchase and sell Bitcoins. As a plus you don't need ID verification for smaller amounts if you are fine with paying a bit higher rate.
Pros: NO ID trades possible, No communication required with the seller, Altcoins possible to buy. Only first time verification required.
Cons: You can not choose your broker so you often trade with someone else.
Coinfloor - https://coinfloor.co.uk/
Coinfloor will let you purchase Bitcoins via the brokers which all have been verified for the buyers extra security. You will have to verify when you register, but after that you can purchase Bitcoins very easily. I have the lest experience using them so there may be other details I'm not aware of.
Pros: Only first time verification required, Brokers well verified before allowed to sell,
Cons: No sell option (not 100% sure), No altcoins
Paxful - https://paxful.com
Paxful is very similar to LBC in the way that its open platform and the brokers are setting up their own terms and condition. It is mostly US based platform, but still you can find section for UK bank transfer purchase/sell.
Pros: Wide range of Payment methods, Coins in minutes via UK faster payment, Government will not have your ID, Selling coins is fast&hassle free. Clean and intuitive interface.
Cont: No altcoins, ID verification may be needed by different brokers, Not so many sellers so price may be higher that in other places.
BitSquare - https://bitsquare.io/
BitSquare is first fully decentralized P2P exchange, it is very anonymous, but due to its lack of reputation system is it very hard for sellers to operate there. As a buyer you should be fine, but the price may be high as there will be not much competition between sellers. You have to download and install the client in order to access the market. I personally really like the idea of client based decentralized platform, but the reputation has to be there in order to allow trust between peers.
Pros: Fully anonymous, Both Buying/Selling available
Cons: As a seller you have high risk, low competition is driving prices very high.
There is one hint I can give you. For buying Bitcoins always try in PEEK TIME 17-21. There is most sellers and everyone is reducing margins to get customers. That is the time of day you will get best price. Avoid buying in night, prices are very high. Before buying check http://preev.com/btc/gbp/source:bitstamp to see if you are not paying too much for your coins!
Exchanges.
Exchanges in the UK are not very good option in my opinion. Firstly because there are no UK exchanges! you have to make SEPA/International transfers outside of UK. Those can take up to week, fees vary from lowest HSBC 4£ up to around 30£ of some banks. Also security checks and lots of questions by banksters are not uncommon. If you still decide to use them make sure you understand the currency exchange rate your bank offers so you don't end up loosing 300£ on the shitty exchange rate the way I did. Also ID verification is required with all the exchanges and as we learned from some cases in past there may come time (probably sooner then later) when the exchanges will work in hand with governments trying to tracks your Bitcoins and connect your Bitcoin activity to your person.
If you still think of using exchange there is few options:
Bitstamp - https://www.bitstamp.net/
By my knowledge most secure/robust exchange out there. Based in Slovenia, good support, fast support.
Bitfinex - https://www.bitfinex.com/
One of biggest on the market with decent reputation. Survived hack once, Now they have issues with accepting/sending fiat payments as the banksters freeze the fiat connections. Until that is resolved I would not recommend using it.
Kraken - https://www.kraken.com/
If I'm not mistaken Germany based exchange. I have never used it much so can't say how good/bad they are.
Bitcoin ATM's
Another option are Bitcoin ATM's. They seem to be quite easy, anonymous and convenient if you happen to have one nearby. Just please make sure that the rate offered is acceptable by you. The provider can choose his own margin on the machine and it would not be one time I saw as high as 50%. There are few webpages showing you ATM locations.
UK - http://www.coindesk.com/bitcoin-atm-map/
London https://coinatmradar.com/city/92/bitcoin-atm-london-uk/
I hope I have covered most of the options for UK market. I have lots of friends there who keep asking me where to buys and sell their coins so this article is mainly for them to give them right direction!
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Thank you!