Tax on CFD in UK advise

[vik2001]

Hi, needed information on the following:
Im trading CFDs but i have a full time job also. So i know the gain from trading CFD is taxable after the CGT allowance of £12,300 (anything under that in profits does not have to be declared)

what happens in the following scenario:
1. Year 1: 10K invested and i make 100% profit = £20k
2. Year 2: 20k invested and i make 100% profit = £40k

As i never make a withdrawal to my bank account, in year 2 do i need to declare my profit as 30k and pay cgt? ( i originally started trading with 10k)

my question is more based around if i never make a withdrawal to my bank account, do i still pay CGT each year on the running profit?

 

[0FXTrader0]

Switch to a spread betting account tax free in UK for non-professional trader

 

[MasterOfCoin]

Hi, needed information on the following:
Im trading CFDs but i have a full time job also. So i know the gain from trading CFD is taxable after the CGT allowance of £12,300 (anything under that in profits does not have to be declared)

what happens in the following scenario:
1. Year 1: 10K invested and i make 100% profit = £20k
2. Year 2: 20k invested and i make 100% profit = £40k

As i never make a withdrawal to my bank account, in year 2 do i need to declare my profit as 30k and pay cgt? ( i originally started trading with 10k)

my question is more based around if i never make a withdrawal to my bank account, do i still pay CGT each year on the running profit?

No.

My understanding (I'm no tax expert) is:

Whether you withdraw profits or not is irrelevant.

But, you will have to declare and pay CGT on any profits over the specified allowance in any given Tax Year.
(subject to any losses that may be offset against this in accordance with the applicable rules).

Thus, in your example, there is a profit above allowance in the second year only.
Profits from the first year are not counted against the second year allowance, they are treated separately for each year.

So. Yes.

You will thus be liable for CGT in the second year, but only for the profit made that year.


Hope that helps.



MOC.

 

[vik2001]

thanks MOC that made sense. my plan for the moment is to leave my money reinvested so i can work on compounding it.

another question if anyone knows, when declaring to HMRC i just have to show the overall gain or loss for the year, i dont have to show or enter each months profit n losses?

 

[MasterOfCoin]

thanks MOC that made sense. my plan for the moment is to leave my money reinvested so i can work on compounding it.

another question if anyone knows, when declaring to HMRC i just have to show the overall gain or loss for the year, i dont have to show or enter each months profit n losses?

When declaring to HMRC, they will probably respond by enrolling you in Self-Assessment.

You may then devote at least several days of your life completing and submitting the multi-page, multi-section, baffling, mindbogglingly complex forms by the specified deadlines or incur heinous automatic penalties.

I'd advise against overshooting the allowances and for switching to tax exempt alternatives before reaching them.

Unless you like rampant, stupendous, bureaucracy, of course.

 

[BigDeal]

I second MOCs reply. Just be aware if you have other capital gains they need to be added together, profitable share sales outside an ISA for example, and also that you can deduct trading costs from your gross gain.

HMRC only need to know the full years calculation. All regulated brokers should provide you with statements and tax vouchers to easily extract the information you need