Exchange BTC for devaluing, inflation-rife fiat currency? Why the hell do you want to do that?
Firstly, cash is income to the taxman. BTCs are not, unless you bring them into the FX system by trading for other currencies. Secondly, large cash withdrawals / deposits are treated with utmost suspicion due to the money laundering element.
Not all merchants accept bitcoins, remember. If you have one particular product that you like, and your favourite merchant both accepts bitcoins AND is financially competitive, then yeah, game on! But I'm a bit bearish on the state of the global financial system based on fiat currencies (yeah, another silverbug / goldbug) and my main interest in Bitcoin is to (a) get some serious hacker-satisfaction of doing something outside the 'system', and (b) exchange my bitcoins for *real* money.
I see BTC as the ultimate 'virtual' money - cryptocurrency, if you prefer. I see silver and gold as the ultimate 'real' money. Buying silver and gold coins with Bitcoins is deliciously ironic, but also a damn sight more secure than holding a large balance of BTC.
I am also more familiar with PM trading. I am not familiar with BTC trading and the BTC/GBP exchanges are both illiquid (by FX standards) and volatile. I don't have time to day-trade BTC - and given the ridiculous fees I'm being charged for transactions on BTC, I need to consolidate somehow... (yeah, I mine in a pool, and get lots of small payments... mea culpa, should have learned that paying 5.00 BTC when my wallet contains loads of 0.01 - 0.23 payments will mean sending hundreds of transactions for my single 5 BTC payment, enforcing a rude fee).
I'm going a bit off-topic here, but as soon as you exchange BTC into GBP (or any other established *currency*), you are effectively receiving *income*. Until BTC are considered a global currency and grouped in with all other FX deals, the UK taxman will see the conversion of BTC to GBP in *exactly* the same light as you doing some IT-service-job and receiving GBP in means of consideration. Therefore, your GBP become *income* and taxable at normal income tax rates. Unless you're a cowboy, you should declare all income and pay tax.
The BIG difference is when you exchange BTC for goods and services that are *not* considered income. A lot of the financial-background types here (like me) are interested in Bitcoin because of the fear that fiat currencies are going to inflate or collapse due to (primarily) the USA's insane debt load. It's not just the USA - the DMO under Gordon Brown issued preposterous amounts of gilts, and we all know about Europe's problems (primarily in the peripheral states). Hence a bunch of us are *really* keen on using our hardware to slowly accumulate BTC to buy silver or gold.
The key is that silver and gold bullion, when 'bought' with bitcoins, are both non-tax 'transactions' (silver sales should attract 20% VAT in the UK, making silver investment a real bitch). All I'm doing is *bartering*, really - giving some computer 'stuff' with no intrinsic value (or any seignorage, due to the distributed nature) and being swapped a silver coin in return. THIS MEANS THE TRANSACTION IS NON-REPORTABLE. There's no need to account for these silver / gold coins. No need.
Sadly the market isn't huge at the moment and the couple of vendors taking BTC for bullion are charging enormous margins - enough to wipe out any potential benefit from not having to pay VAT. However, even though you end up paying around the same in BTC/GBP terms for a silver ounce with the vendor I've used (Midas Bitcoin), the non-financial benefit one gains is that the transaction is utterly painless and then *invisible*. I've not paid cash for the coin - so Midas doesn't have to account for the sale. I haven't paid VAT so don't need to bung it into my VAT return. I may as well have found the coin on the pavement whilst wandering past the champagne bar in Tower 42... This, in itself, has value. And from my dealings with Midas, including one problem, he dealt with the problem very professionally. So best of luck to him, it's a good market to get into right now. Actually considering it myself...
If this is a TL;DR then here's a precis - moving GBP cash around either attracts 'cash transaction' attention, or is simply seen as 'income' to the taxman. Buying goods and services with BTC avoids this, but what if your aim is non-depreciating savings? Consumer goods tend to become worthless. So my advice is to buy silver and gold coins with some of your BTC. Gold and silver will remain safe havens. Your remaining BTCs can be used for day-to-day consumption.