Tax question

[Brew84]

Hi,

I know this question will probably seem daft but here goes!

I have a full time job in the UK and pay all taxes that i'm suppose to through the company I work for.

In an evening I trade oil, and was wondering if I have to declare any profits made to HMRC, and also if I don't disclose any profits to them can they find out that im making extra revenue?

 

[A Dashing Blade]

bottom line, that's tax evasion.
Not worth the risk.

 

[Brew84]

Cheers! thought it didnt seem right!

 

[HawkTrader]

bottom line, that's tax evasion.
Not worth the risk.

How are they supposed to find out?

 

[donaldduke]

Hi,

I know this question will probably seem daft but here goes!

I have a full time job in the UK and pay all taxes that i'm suppose to through the company I work for.

In an evening I trade oil, and was wondering if I have to declare any profits made to HMRC, and also if I don't disclose any profits to them can they find out that im making extra revenue?

If you Spread Bet its tax free.

Otherwise under CGT the first 10K is tax free (assuming you have not used your allowance else where).
If you have joint account brokerage with your partner you can make 20K tax free.

The rest is taxed at 18%.

So if you make 50K profit a year, you pay just 7K in tax (or just 5K if you have a joint account).

You can claim CGT if you are a directional speculator in oil, but if you are a market maker or arbitraguer then you might have to pay income tax which can be a much higher rate.

 

[Brew84]

So ill have to declare any profits as CGT as im not spread betting.

Also though do you know how the HMRC would be able to find out about any profits if I didnt declare it? As im already paying taxes from my main employment.

The plan is eventually be earning enough to trade full time, and then become self employed through my own company.

 

[donaldduke]

So ill have to declare any profits as CGT as im not spread betting.

Also though do you know how the HMRC would be able to find out about any profits if I didnt declare it? As im already paying taxes from my main employment.

The plan is eventually be earning enough to trade full time, and then become self employed through my own company.

Are you making over 10K for starters?

Just pay the tax, its only a flat 18% above that amount. A few years ago it would have been your highest rate of income tax, ie 40%.

Your chances of getting caught are slim but the risk is not really worth it for such a small amount of tax.

You get to sleep easy, otherwise you could get caught 5 years after the event.. its always in the back of your mind.

I guess you dont live in the UK permanently, so you probably think you can get away with it easier.

 

[HawkTrader]

Are you making over 10K for starters?

Just pay the tax, its only a flat 18% above that amount. A few years ago it would have been your highest rate of income tax, ie 40%.

Your chances of getting caught are slim but is risk is not really worth it for such a small amount of tax.

You get to sleep easy, otherwise you could get caught 5 years after the event.. its always in the back of your mind.

Don't you think 18% is absolutely disgusting, though? Yeah yeah, need to pay tax, build roads, lalala. I don't care, we've just wasted £2.5bn in Afganistan searching for the "evil villian" named Obama... sorry, Osama Bin Laden and while doing that lost lots of young lives, on each side. Remind me why again?

Time for a revolution?

 

[Brew84]

Thats a massive subject change eh Hawk!

Yeah the CGT is crap but there is nothing that can be done about it, without leaving the country for a tax haven, but i suppose to be able to do that you must be able to earn a decent amount from trading consistently!

Cheers for the advise donaldduke!

 

[HawkTrader]

Of course, sorry, Brew. I got a bit carried away!

I seem to remember reading on HM revenue that you must tell them WHEN you start making money, and the amount you are allowed to make as a side income is around 2,500 and 5,000 pounds (I can't remember the exact amount). So does that mean, if you were to start trading now and made 25 thousand lets say, would you only have to declare in April 2011?

Could someone please clarify, I'm confused too!

 

[donaldduke]

Of course, sorry, Brew. I got a bit carried away!

I seem to remember reading on HM revenue that you must tell them WHEN you start making money, and the amount you are allowed to make as a side income is around 2,500 and 5,000 pounds (I can't remember the exact amount). So does that mean, if you were to start trading now and made 25 thousand lets say, would you only have to declare in April 2011?

Could someone please clarify, I'm confused too!

You are supposed to inform HMRC if you become self employed.

CGT profits should be declared on your tax return for the tax year they are due.

 

[HawkTrader]

You are supposed to inform HMRC if you become self employed.

CGT profits should be declared on your tax return for the tax year they are due.

What about those who are employed and are making an income on the side?

 

[donaldduke]

What about those who are employed and are making an income on the side?

You most likely making capital gains not income. But if you think you are subject to income tax not capital gains then you should talk to your accounant/tax lawyer etc.

 

[D70]

If you Spread Bet its tax free.

Otherwise under CGT the first 10K is tax free (assuming you have not used your allowance else where).
If you have joint account brokerage with your partner you can make 20K tax free.

The rest is taxed at 18%.

So if you make 50K profit a year, you pay just 7K in tax (or just 5K if you have a joint account).

You can claim CGT if you are a directional speculator in oil, but if you are a market maker or arbitraguer then you might have to pay income tax which can be a much higher rate.

The bit highlighted in red is a common misnomer. The spread betting companies say they are "tax free" because it sounds attractive to advertise it this way and is partly true. BUT if your sole income is from spread betting IT IS NOT TAX FREE. Sadly you have to pay tax on your income just like everyone else.

You can go for the not declare line but should you ever be investigated for whatever reason and they find vast sums of income from another source i am under the impression that you will be in spot of trouble, playing the fool or not!

Probably worth getting advice from an accountant / tax man if your trading profits (spreadbetting or not) start to get chunky.

 

[donaldduke]

The bit highlighted in red is a common misnomer. The spread betting companies say they are "tax free" because it sounds attractive to advertise it this way and is partly true. BUT if your sole income is from spread betting IT IS NOT TAX FREE. Sadly you have to pay tax on your income just like everyone else.

You can go for the not declare line but should you ever be investigated for whatever reason and they find vast sums of income from another source. You will be faced with fine / imprisonment etc...

Many T2W members have written to HMRC regarding this have been told that Spreadbet profits are tax free even if it is their main source of income.

Do you know anyone who has been told otherwise by HMRC?

 

[D70]

Many T2W members have written to HMRC regarding this have been told that Spreadbet profits are tax free even if it is their main source of income.

Do you know anyone who has been told otherwise by HMRC?

Hi Donaldduke,
That is interesting. I was informed by accountants, not the HMRC directly.

Maybe the grey area is the "main source of income" part...
The advice I recieved basically ran out that only if one could show another source of income to support themselves would their trading profits be free from tax. Which to me...... makes sense.

Maybe we need another letter!

 

[montmorencyt2w]

Slight variation on this question:

Say you have been successfully spreadbetting, and have got to the point where you can reliably make 9k or more profit per year (or whatever the limit is for CGT).

Say also that you have another source of taxable income and are paying normal PAYE tax on that, so, to day, spread-betting hasn't been your only source of income.

Now you want to give DMA a try as you keep hearing it's much better than SB, better spreads, less chance of being rooked, faster, etc.

Now, you just put a toe in the water, and DMA trade at a low level and keep your trading profit from that below 9k (or whatever the limit is). Maybe you carry on with the SB in parallel. Now at this point, you have not become self-employed, so there is no need to communicate with the HMRC for that reason.

Are you still supposed to make a tax return to cover that <9k DMA profit income, even though it is below the threshhold for tax? (bearing in mind that most ordinary PAYE taxpayers don't need to make tax returns).



BTW oil futures was mentioned above. What about things like FX?

Will profit from trading this be liable for CGT or income tax?

BTW, in the case where income tax is payable, won't NIC also be payable?

 

[Jack o'Clubs]

Are you still supposed to make a tax return to cover that <9k DMA profit income, even though it is below the threshhold for tax? (bearing in mind that most ordinary PAYE taxpayers don't need to make tax returns).

Yes, if the total of assets disposed during the year is greater than £38,400 then you're supposed to fill in the form even if you're under the £9,600 limit, although I'm not sure i) how on earth they'd find out if you didn't, ii) what they would do about it, as you'd have no tax payable anyway (maybe a nominal fine?); and iii) how you're supposed to account for the implied margin in futures contracts, ie is the disposal the margin amount or the full contract value - don't know. On shares its more obvious.

 

[donaldduke]

Slight variation on this question:
...

Are you still supposed to make a tax return to cover that <9k DMA profit income, even though it is below the threshhold for tax? (bearing in mind that most ordinary PAYE taxpayers don't need to make tax returns).



BTW oil futures was mentioned above. What about things like FX?

Will profit from trading this be liable for CGT or income tax?

BTW, in the case where income tax is payable, won't NIC also be payable?

Bit late asking all these question on January the 31st, the last deadline for tax returns

 

[montmorencyt2w]

Bit late asking all these question on January the 31st, the last deadline for tax returns

Hypothetical question old bean for future planning purposes.
I'm only spread-betting for the moment.

I'm asking so I know what the situation is should it ever apply to me.