Forex trading and UK tax

[LesE]

As a newbie I have just found out that in order to trade Forex tax free it has to be via a Spread betting company/account and not through a Forex Trader. I am now familiar with several trading systems and MT4 but have now discovered that it is not possible to Spread Bet with MT4 only forex trade. I have just opened a demo spread betting account with Capital Spreads and the interface to put it politely is disappointing.

So what do others do? The opions as I see it are:-

Use a Forex Trader and take your own decision regarding tax declarations
Use a spread betting company but only for placing trades and use a demo MT4 account with a Forex trader for analysis
Use a signal service and not bother with any analysis just put on the trades as dictated by the signal provider on a spread betting account.

Help would be most appreciated from those of you experienced enough to have gone through this dilemma

Les

 

[Magos]

As a newbie I have just found out that in order to trade Forex tax free it has to be via a Spread betting company/account and not through a Forex Trader. I am now familiar with several trading systems and MT4 but have now discovered that it is not possible to Spread Bet with MT4 only forex trade. I have just opened a demo spread betting account with Capital Spreads and the interface to put it politely is disappointing.

So what do others do? The opions as I see it are:-

Use a Forex Trader and take your own decision regarding tax declarations
Use a spread betting company but only for placing trades and use a demo MT4 account with a Forex trader for analysis
Use a signal service and not bother with any analysis just put on the trades as dictated by the signal provider on a spread betting account.

Help would be most appreciated from those of you experienced enough to have gone through this dilemma

Les

Forex tax free has to be spreadbetting or Binary or ITALY (i am not 100% sure [rumour]).. something like a bookie (CMC, IG index, Man financial< all of them do spreadbetting as well as CFD's forex and alot more)


I would recommend MetaTrader 4 for analysis and Quantitative trading.

 

[LesE]

Forex tax free has to be spreadbetting or Binary or ITALY (i am not 100% sure [rumour]).. something like a bookie (CMC, IG index, Man financial< all of them do spreadbetting as well as CFD's forex and alot more)


I would recommend MetaTrader 4 for analysis and Quantitative trading.

Thanks for the reply.
Not sure what you mean by Quantitative Trading?

As I understand it if I trade with a Forex Broker then my profits (optimist!) are subject to Capital Gains tax and not income tax. Since the CG allowance is currently £9600 per person in this tax year I thought it might be worthwhile sticking with Alpari using MT4 until such time as I make so much money that I then have to move over to spread betting. One big advantage seems to be that starting with a relatively small amount and risking say 3% of capital per trade as I have had recommended to me on many occasions it is difficult to find a spread betting company that allows bets of such a small amount per pip whereas with a micro account you can get down to £0.25 per pip or less which is the sort of level that I will start at depending on the stop loss I choose to use.

 

[£10kLoser]

You will find that a live account with Capital Spreads runs MUCH better than the demo account. I use Metatrader for charting and indicators and place trades with IG Index and (for longer trades) Capital Spreads - well, the identical Tradefair, actually.

 

[alan5616]

As a newbie I have just found out that in order to trade Forex tax free it has to be via a Spread betting company/account and not through a Forex Trader. I am now familiar with several trading systems and MT4 but have now discovered that it is not possible to Spread Bet with MT4 only forex trade. I have just opened a demo spread betting account with Capital Spreads and the interface to put it politely is disappointing.

So what do others do? The opions as I see it are:-

Use a Forex Trader and take your own decision regarding tax declarations
Use a spread betting company but only for placing trades and use a demo MT4 account with a Forex trader for analysis
Use a signal service and not bother with any analysis just put on the trades as dictated by the signal provider on a spread betting account.

Help would be most appreciated from those of you experienced enough to have gone through this dilemma

Les

If you check out IG Index or Finspreads, you'll find that you can start trading at 10p per point for the first week. I believe that in the 2nd week, you need to increase to 20p and so on, until you reach their normal minimum of 50p per pt.

The spread betting market is very competetive and, because of this, you will find very little difference between the prices offered by spread betting companies and direct access brokers. With the currency pair which I trade, the spread bettors are about 2 pts. above direct access. When you take into account the dealing costs with a DA broker, I would rather use a spread betting company. Another benefit of using an SB, is that you avoid paying CGT to the Inland Revenue

 

[Magos]

Thanks for the reply.
Not sure what you mean by Quantitative Trading?

As I understand it if I trade with a Forex Broker then my profits (optimist!) are subject to Capital Gains tax and not income tax. Since the CG allowance is currently £9600 per person in this tax year I thought it might be worthwhile sticking with Alpari using MT4 until such time as I make so much money that I then have to move over to spread betting. One big advantage seems to be that starting with a relatively small amount and risking say 3% of capital per trade as I have had recommended to me on many occasions it is difficult to find a spread betting company that allows bets of such a small amount per pip whereas with a micro account you can get down to £0.25 per pip or less which is the sort of level that I will start at depending on the stop loss I choose to use.

Quantitative Trading: using mathematical formulas to trade (i.e. creating an Expert Advisor using MetaTrader 4 platform)

sticking with Alpari using MT4 (not a bad option)

Finally up your size slowly and when your system is working go wild

 

[Maclintog]

If you’re new to forex, you’re going to need forex charts. As you develop your forex trading system, use the demo accounts that many trade brokers provide. They’ll generally provide free forex charts as part of their demo forex trading system.

 

[JP1966]

Spread betting is not tax free if you are classified as a trader by the inland revenue. To 'earn' this classification you would be surprised how few regular trades it takes.

 

[£10kLoser]

Trades or bets? I don't believe the IR can call betting trading when they have made the legal distinction of classifying spread betting as betting. On what grounds do you state this?

So, how many 'trades' does it take - or is this just hearsay and guessing?

I've been trading for over 10 years and never genuinely heard of spread betting being taxed - only second and third hand reports with no proof. The IR themselves state it's tax free and that's surely not dependent on 'degree'.

 

[alfiemal]

Hi, you are correct £10k loser, SB is not taxable. I have spoken to an Inland Revenue Senior Area Officer about this in detail before I started trading. Whether its full time or part time its gambling and its not reportable or taxable.

I would rather use an FX broker with very tight spreads such as Dukascopy than SB company but profits would be taxable so I stick with SB.

The reason is that there are way more losers than winners, millions of pounds are lost, if the IR started taxing the winners they would have to allow the losers to offset there losses and claim tax back, thats how it works with other investments. Clearly shafting themselves!

If it was the other way round and most people were making a tax free fortune from SB the government would move the goalposts, change the law and start taxing the majority of winners!

 

[oiltanker]

...Spread betting is not tax free if you are classified as a trader by the inland revenue....

if you are only spread betting its tax free. only non spread bet trades are taxable.

 

[£10kLoser]

...Spread betting is not tax free if you are classified as a trader by the inland revenue....

Duh! But the whole point is the IR does not calssify spread betting as trading or spread betters as traders.

That's like saying if they classify you as below the tax threshold, you don't pay tax on £10,000,000 - it's not going to happen.