Earning potential through trading

[JTrader]

Theoretically, trading can present an earning opportunity that is unlimited. While a £500,000 salary sounds great in principal, around £230,000 of this goes to the taxman (unless people are this successful through spreadbetting).

Half of profits over £30,000-£35,000 will go to the government when paying tax and national insurance bills.

On the level of an individual trade, once above the £30-35k level, a trader exposes themselves to losing 100% of their stake in a trade, while only keeping half of what they hope to make on the trade. Therefore is it worth constantly increasing your stakes?

My approach to trading is to take what the market affords you. Therefore I am hapy to let my profits run and comew what may. But as for constantly increasing stakes with no limit in sight as your trading and pot of money develop, I am not sure.

I'm interested to know how others consider this issue. Is it worth the risk trying to make more than £100k per annum?

Do you say I am happy to be making x amount and will not up my stakes beyond this?


Many thanks

jtrader.

 

[JJL3142]

.

Jtrader,

My take on this is that this should be developed in your business plans - briefly to trade x,y,z markets to make a certain number of points (or £) and proper money management.

Also personally speaking on relying on one income stream in not a good idea - I have been made redundant before, I have lost a load of money on the markets (like most people here). So trading has become another income generation for me - I dont overexposure myself to it and it allows me to become emotionally detached.

 

[donaldduke]

a trader exposes themselves to losing 100% of their stake in a trade, while only keeping half of what they hope to make on the trade. Therefore is it worth constantly increasing your stakes?

Most traders would love to pay 40% on a million (or even 100K) of trading profits each year.

You dont want to think about this on a trade to trade basis.
You only offset losses against profits so they only take half of what you make at the end of there year.

Also its only 40% not 50%, you dont pay NI in the high braket (unless you take your trading profits PAYE,
which would be very strange).

There is obviously a cut off point where its not worth working (or trading) if you get taxed too much,
that limit is probably on the other side of 50%, people just wouldnt bother working overtime and the goverment would actually raise less tax with a higher band over 50%..


If you are concerned about tax you can trade through an offshore company, roll up your profits and
retire in the sun tax free.

 

[JTrader]

"You dont want to think about this on a trade to trade basis.
You only offset losses against profits so they only take half of what you make at the end of there year.

Also its only 40% not 50%, you dont pay NI in the high braket (unless you take your trading profits PAYE,
which would be very strange)."

Hi donaldduke

I had factored NI contributions into the 50% idea, I didn't know that you don't pay NI in the high bracket, so this makes things quite a bit better that what I'd thought.

Please can you explain what is meant by "you only offset losses against profits so they only take half of what you make at the end of there year."

This issue of paying tax as a self-employed person is a new one to me.

By trading through an offshore company, rolling up my profits and retiring in the sun tax free, I take it that this is illegal and I would have to go and live on the Costa Del Sol or in Rio?

Thanks a lot

jtrader.

 

[JonnyT]

If you repatriate the money then it is liable to UK tax.

If you trade out of Gibraltar for example then retire to Spain you may escape Tax completely

JonnyT

 

[Hittfeld]

If you trade out of Gibraltar for example then retire to Spain you may escape Tax completely

JonnyT

No, unfortunately you won`t. You would be taxed by the spanish - which is underestimated.

And so are the costs for trading through offshore companies. Often the tax was cheaper than fraudulent directors or trustees.

Your best bet would be NL, I and CH. And for us non-british its Good Ol`England.Yeah!

Hittfeld

 

[JonnyT]

The Spanish authorities wouldn't know about Gibralter affairs, being a British colony...

JonnyT

 

[Hittfeld]

The Spanish authorities wouldn't know about Gibralter affairs, being a British colony...

JonnyT

Correct, but your income during retirement will be taxable. And maybe a taxation on your capital -as in many EU-countries.

Many guys I know trade online through a swiss or luxembourg broker. 2 accounts always - one off the books. One account officially declared.

Hittfeld

 

[JonnyT]

The whole point is that there will only be incidental income during retirement.

i.e. Dividends, Bank Accounts etc.

I'm staying firmly in Britain and paying my taxes!

JonnyT

 

[Hittfeld]

The whole point is that there will only be incidental income during retirement.

i.e. Dividends, Bank Accounts etc.

I'm staying firmly in Britain and paying my taxes!

JonnyT

Dividends and interest on savings is heavily taxed in Spain.

Anyway I had thought you would follow in the footsteps of MARC RICH.

Kind regards

Hittfeld

 

[FTSE Beater]

On the level of an individual trade, once above the £30-35k level, a trader exposes themselves to losing 100% of their stake in a trade, while only keeping half of what they hope to make on the trade. Therefore is it worth constantly increasing your stakes

Hi JTrader

What DonaldDuke was trying to say is that you take your profits - your losses and then you get taxed on that amount. So if you placed a losing trade, the government would lose 40%-50% of that losing trade, as you would offset that losing trade against the profitable ones

HTH

 

[ChartMan]

I have always thought that it must be possible to run a DA account and an SB account.The SB account takes a longer term view and is tax free ( maybe) and the DA account trades inthe opposite direction to the SB account WHEN the move goes against the SB direction.
So, say you go long SB on the Dow. With DA, you short all the pullbacks. Will this work?.... When won't it work?
Just a thought.

 

[Buk]

funny you you should say that, I use a similar strat on the cable. Hasn't worked too well of late with contracting, choppy ranges etc, most of the swing/longer term trades have been stopped for smaller gains recently. But when it goes on a run, it allows wider (trailing) stops on the swing moves, and recoups a good deal of the difference on the pullback trades.

 

[Uncle]

If anyone is earning the amounts quoted by trading the marketsand bothered about the amount of tax one might be liable to, then I suggest it is time you invested a little of your profits in a good Accountant - yes the cost is tax deductable !!!!!

John

 

[lightning bolt]

Is there any tax evasion specialists?,

 

[minx]

How about this one, its slightly different to the one below. Say for example SBing is really inefficient in commodities so you have to do it through a broker, ok, so you earn £100k trading these. Also you trade the bund, which is efficiently priced by SB companies, well you think the bund is going to go up so you buy the Bund SB and sell the bund future on eurex, you buy twice the amount for the SB so it counters the bund future loss and you still have the original bund long. So now you make £100k (taxable) from commodities, lose £100k bund futures (tax deductable) and make £200k bund spreadbetting (tax-free). You still have £200k in income but none of it taxable due to your 'terrible' bund trades....... does this sound like garbage, have I explained it properly or would the tax man have me in prison picking up soap before I could blink????

 

[JTrader]

"Hi JTrader

What DonaldDuke was trying to say is that you take your profits - your losses and then you get taxed on that amount. So if you placed a losing trade, the government would lose 40%-50% of that losing trade, as you would offset that losing trade against the profitable ones

HTH"

Hi FTSE Beater

So would a trader be able to offset total losses against total gross profit or total net profit?...

So if I were to trade forex and make an average proft of 60 pips per week, would i offset = 150 pips gross profit - 90 pip total losses = 60 pips. Would this be just the same as, no more beneficial than paying taxes on my total profits - 60 pips average.

or

would i be able to offset total losses of 90 pips, against net profits of 60 pips - thus meaning that i wouldn't be liable to pay any tax (?).

Cheers

jtrader.

 

[iceman1265]

jtrader

In trading, as in any other business, you only pay tax on net profits.

chartman

You need to be careful when hedging. Ordinarily the IR likes to treat futures profits as capital gains, but if you hedge a futures trade with a spread bet they then consider that as trading, which is liable to income tax and national insurance.

iceman1265

 

[Airthrey Capital]

Is there any tax evasion specialists?,

There is a specialist firm I know of that you can contact called Piggot & Dodd.

Just ask for Lester or Ken when you call.

 

[Salty Gibbon]

Tax evasion is illegal.

It is tax avoidance techniques that you should be looking at - and there are many.