Another UK tax question

[acecard]

Hi all,

I'm new to this forum, although not new to forex; I am just coming to the end of my third profitable month and so am now thinking that it's time to consider the tax implications of forex trading!!!

I know there are a lot of previously asked questions on T2W relating to forex trading and the UK tax laws, however, either I am not typing in the right search question, or this specific issue hasn't been dealt with yet!

Basically, my focus at the moment is on account growth, so am not planning on withdrawing any funds from my broker until such a time as I have a large enough account to enable me to do so and live off the money (luckily my wife is covering the household bills with her salary to enable me to go on this venture!). So, my question is, if I am not withdrawing any money from my broker, do I have to declare this as income, or is it only taxable once the funds are realised into a bank account?

Thanks all
AC

 

[malaguti]

Hi all,

I'm new to this forum, although not new to forex; I am just coming to the end of my third profitable month and so am now thinking that it's time to consider the tax implications of forex trading!!!

I know there are a lot of previously asked questions on T2W relating to forex trading and the UK tax laws, however, either I am not typing in the right search question, or this specific issue hasn't been dealt with yet!

Basically, my focus at the moment is on account growth, so am not planning on withdrawing any funds from my broker until such a time as I have a large enough account to enable me to do so and live off the money (luckily my wife is covering the household bills with her salary to enable me to go on this venture!). So, my question is, if I am not withdrawing any money from my broker, do I have to declare this as income, or is it only taxable once the funds are realised into a bank account?

Thanks all
AC

If you get paid into a bank account and never withdraw the money, do you still get taxed? same for capital gains tax mate

 

[acecard]

No, what I meant was, if the funds stay in my brokerage account, are they liable for tax? I'm saying that until my account is large enough to make money that I can use to live off, I will be leaving all the money in my brokerage account.

Thanks
AC

 

[barjon]

No, what I meant was, if the funds stay in my brokerage account, are they liable for tax? I'm saying that until my account is large enough to make money that I can use to live off, I will be leaving all the money in my brokerage account.

Thanks
AC

As malaguti says, a capital gain is a capital gain it doesn't matter where you hold the proceeds.

 

[acecard]

Ah ok, gotcha. I didn't understand the wording of the post. Apologies. I am a little confused about this CGT vs. income tax thing as i have read conflicting things about this. Some are saying that "investement" would be liable for CGT, as in long term trading, whereas if you are a higher frequency day trader, that would attract income tax?

Thanks
AC

 

[malaguti]

Ah ok, gotcha. I didn't understand the wording of the post. Apologies. I am a little confused about this CGT vs. income tax thing as i have read conflicting things about this. Some are saying that "investement" would be liable for CGT, as in long term trading, whereas if you are a higher frequency day trader, that would attract income tax?

Thanks
AC

nope they are different. income tax is earned income from employment
every other form of income needs another tax bracket. they never fall under income tax

 

[acecard]

Ok, so this leads me onto the question of spreadbetting......is this REALLY tax free? Perhaps I should go down this route (although I like my ECN broker). I read that if trading is your main form of income that it is in fact also taxable? Yet most things i see about spreadbetting accounts says that it's tax free. How do HMRC define "main for of income"? Not much definitive is written about this!!

Thanks
AC

 

[NVP]

Hi all,

I'm new to this forum, although not new to forex; I am just coming to the end of my third profitable month and so am now thinking that it's time to consider the tax implications of forex trading!!!

I know there are a lot of previously asked questions on T2W relating to forex trading and the UK tax laws, however, either I am not typing in the right search question, or this specific issue hasn't been dealt with yet!

Basically, my focus at the moment is on account growth, so am not planning on withdrawing any funds from my broker until such a time as I have a large enough account to enable me to do so and live off the money (luckily my wife is covering the household bills with her salary to enable me to go on this venture!). So, my question is, if I am not withdrawing any money from my broker, do I have to declare this as income, or is it only taxable once the funds are realised into a bank account?

Thanks all
AC

3 months ?..........would suggest focussing your energies on the next 1,000 trades and then worry about tax on the megaprofits :smart:

N

 

[acecard]

Yes NVP perhaps, although asking the questions doesn't detract from my trading energies, so isn't wasted. What happens if (or should I say when!) I get 1000 net profitable trades down the line and then realise that I didn't have my tax affairs sorted from day one......a tax bill that could have been vastly reduced with a little planning. I'm not saying that I want to hire a crash team of the most expense UK tax specialists, but I DO want to know what I'm up against in advance, in case of anything that I need to be mindful of from the start.......that's how I try to approach everything I do.

For example, if over the next few years I am making the modest % gain that I have been, that could amount to a decent sum, and the potential tax on that would certainly make a difference; if spreadbetting is indeed as it has been advertised, then I need to be using a spreadbetting account from now! If not, then I need not worry!!

Does anyone have anything in support of SBing and the true taxation position on it? My limited (and perhaps misguided) understanding thus far is that there is confusion relating to the issue of main source of income; I have heard numerous people say that if you have a PAYE income, then HMRC will likely leave you alone for fear of you offsetting your losses against it.

All I am doing is tax planning, which I see as sensible, in the same way as you would generate a business plan prior to commencing business.

Thanks
AC

 

[timsk]

. . . All I am doing is tax planning, which I see as sensible, in the same way as you would generate a business plan prior to commencing business.

Hi AC,
Welcome to T2W!

Yes, your points are fair and well made. By the same token, I, NVP and many others have been around a long time and seen this issue discussed to death. It's mostly academic, as very few of the people who enquire about it will ever have to worry about it. Hopefully, this won't apply to you and, certainly, it sounds as if you've got off to a promising start. Well done!

If you don't think the various official documents from HMRC are clear enough on the issue, your best bet is to phone them up and get a definitive answer from the horse's mouth. In the meantime, this thread will (hopefully) obviate the need to have the whole discussion all over again and will fill you in on the views from members on both sides of the argument: Are all my spread bet profits tax free?.

Enjoy!
Tim.

 

[acecard]

Thanks for that timsk. I'll get my teeth into that thread over the weekend! Indeed I hope things carry on along the path they have......of course, there are no guarantees, but one must have a positive outlook!!!

Thanks again
AC

 

[Decipher Tax]

As a UK resident you are taxed on all income as it arises and on all gains as they accrue. The fact that you are not actually remitting your profits into your bank account and living off these profits does not make a difference. So, the answer to your question is - yes - you do have to declare your profits to HMRC. The way in which you trade will determine whether you pay business tax or capital gains tax.

There are specialist tax advisers out there which can help you with your other questions.