Professional Day Trading

[jls483]

I have two questions

1. Paying tax if spread betting is my main income
2. Getting a mortgage/credit rating as a day trader.

1. I've seen it said in a number of places that although spread betting is tax free you will have to pay income tax if spreadbetting is your main income.

Can anybody confirm this?

So if I earn £30k from my day job and £20k then I pay taxes on the 30k, but if I earn £20k from my day job and 30k from the spreadbetting then I pay taxes on £50k. Is this right?

Is it up to me to declare that spreadbetting is now my main income or can I wait until they catch me?

Is anybody actually in the situation of paying taxes on their spreadbet income? What happened to you?

2. Does anybody have any experience trying to get a mortgage or any other form of credit when your only or main income is from day trading?

Was it possible? Could I call it a business and produce three years of trading profits?

Thanks for any help.

John.

 

[julesrules]

i have a friend who is a tax advisor, he creates offshore companies so his clients dont pay tax on trading profits (even as main income), he also helps gain credit (mortgages etc.) PM me if you require further information.

 

[jim_b]

This is something I've been wondering about. Can any of the pro traders on the board comment on how they manage tax?

J.

 

[FTSE Beater]

Hi Jim_b

It's pretty simple really.

• Once a month, add up the winnings (or losses) put them on a spreadsheet.
• Add up the expenses for the month - data feeds, computer equipment, business dinner (<Strike>with beautiful young blonde</strike>) etc.
• Submit it to an accountant, complete with trading statements, in May and let them sort the tax stuff out.

HTH

 

[jls483]

Dear FB,

But at what point do spreadbets stop being tax free? When does pocket money profits become real income?

Is there a clear definition or is it at the tax man's discretion.

If it is at their discretion has anybody had any experience of it.

Does anybody know how to move this thread to the correct board? I posted it here by mistake!

John.

 

[FTSE Beater]

Hi John

It's such a gray area. I just make it easy on myself and declare the tax. If you have a full-time job, then I would say that the profits are "pocket money" - but please please check with the inland revenue. At the end of the day their going to want your money.

Moving threads I think has to be done by the moderators

 

[sidinuk]

Spreadbetting is tax free, as it is classed as gambling. If you make a living from spreadbetting and have no other income the revenue MAY try to tax you on it. I very much doubt whether they could though. Spreadbetters tend to be net losers, so if they start taxing the winnings of one person then all the losses would be allowable as well from everyone else, which would leave them worse off. Don't forget that the spreadbet companies are on the other end of your trades and they will be paying taxes on their profits, which is partly why the spreads are larger in the first place.

If you trade futures these are taxable. You may be able to claim a business and thus computers, data feeds etc would be allowable deductions and the profit taxed as income. It is more likely though that the revenue would try to tax speculative trading (which is what it is) as capital gains, therefore the only costs allowable would be the commission charges in dealing the contracts. The Inland Revenue would rather tax these as capital gains as any loses would then have to be offset against other capital gains rather than other income.

I am a qualified accountant and this is my understanding of the rules. They are open to interpretation though and everyone has different personal circumstances which need to be taken in to account.

As far as getting a mortgage is concerned if trading is your only income source. Most high street lenders wouldn't count it because of the unpredictable nature of trading profits. I would recommend a self cert mortgage through UCB (or others). You will need a 15% deposit and will pay an extra 1% on the interest rate for the privilege. Alternatively get the mortgage whilst you still have a job!

 

[Skimbleshanks]

Does anybody know how to move this thread to the correct board? I posted it here by mistake!

I've moved it from Indices to Trading for a Living.

 

[Skimbleshanks]

A very personal view: I doubt that any good trader would have a mortgage in the first place.

If you are trading, you really don't want any sort of pressure such as having to find funds for mortgages, school fees, etc, hanging over you. And if you really were any good you would have earned sufficient to pay these off.

I also doubt that anyone will actually tell you on a public bulletin board how they address the tax issue - I'm talking about those earning oodles of dosh, not a few thousand here and there.

 

[jls483]

If you are a good trader and have got a system that makes at least 50% and you can get a mortgage for 100,000 at 5% then you will make an additional 45,000 in your first year.

 

[DanielLambert]

If you are a good trader u are making more than £100,000 a year!!
Why do you need to be worrying about a £100k mortgage?

 

[jls483]

True - if you can't find ways to spend an additional £45k a year it would be an unnecessary inconvenience taking a mortgage.

 

[DanielLambert]

Sorry if Im being nosey....

Do you trade for a living? You seem to give the impression of having a very weird take on life?

 

[jls483]

I make about half my income from trading/investing.

Not exactly what you see as weird. I would have thought the majority of people would be happier earning 145k rather than 100k. Investing with returns at a higher rate on money borrowed at a lower rate is a popular investing past-time - its called gearing.

 

[DanielLambert]

But a successful trader doesnt need that kind of gearing!

If you are successful enough you dont need to commit all of your financial resources to supplying your initial and variation margin requirements, which is what u would be doing.


How is buying FTSE futures at 4000 and sitting on them indefinately earning a higher return? For the last 4 months you have lost 20 percent of your capital. you have got to earn 25percent now to get back to square one.

 

[jls483]

okay - I think we are coming at this from different angles and I am more at fault as I am coming at it from the investing angle and you are coming at it from a trading angle. So you could say I was the "weird" one as this is a trading web-site.

When I look at an investment I'm thinking about the return you can get on your capital. If I find something which gives a better return than what I can borrow at I would consider borrowing some money and putting it into the investment.

This is obviously not the way it works with trading.

Sorry.

John.

 

[DanielLambert]

I said you had a weird take on things , I didnt say you were weird.


What I perceive as weird is being prepared to have £100k in capital , but to take out a £100k mortgage and then proceed to buy FTSE futures and just sit on them in the hope they will rise!!!, regardless of how far they fall.

I think most people will agree that you "stop" a loss and dont chase it. You could end up sitting for years waiting for your loss to turn a profit. Whereas if u had stopped the loss you would have long forgotten about that trade.

Believe me , I think we all learn the hard way.

 

[jls483]

Oh Blimey - I've just read the whole of your post and I see that another thread is turned into a jls483 bash!

You say that in the past 4 months I have lost 20% of my capital. Where on earth do you get this from - I am actually about 20% up.

And whatever I am returning is irrelevant - I thought we were talking about whether or not a trader would take out a mortgage.

 

[DanielLambert]

Why do you see it as a "bash"?

If you spout such avantgarde ideas , you have got to be prepared to take comments from your peer group.

 

[jls483]

I'm delighted to take comments from my peer group.

What I have problems with is people telling me my methods are suicidal when clearly they are not. People comparing me to Nick Leeson when they are numerous differences and worst of all half way through a discussion about whether or not traders should take mortgages I'm told that in the past four months I have lost 20% when in fact I have gained over 20%. I'm afraid I regard that as a bash.

I also did not spout any of my ideas they were forced out of me by inquisitive posters.

Just because you do not understand my trading system and think I am losing lots of money please do not let this cloud your judgement over every post that I make in the future. It could get quite tiring.

Thanks.

John.