Tax software for cfd's

[icarus701]

Hi,

Can anyone suggest software that can calculate tax when it comes to cfd's. Basically I will be day trading across multiple markets and it will be my only source of income, so spread betting is out i'm afraid. I will be using the igindex platform as i'm used to it (through SB).

I'm pretty sure this a newb question but any pointers would be great!

 

[malaguti]

Hi,

Can anyone suggest software that can calculate tax when it comes to cfd's. Basically I will be day trading across multiple markets and it will be my only source of income, so spread betting is out i'm afraid. I will be using the igindex platform as i'm used to it (through SB).

I'm pretty sure this a newb question but any pointers would be great!

I think you might be potentially making this more complicated than it needs to be:

if this is your only source of income your total income will be your total gains/losses from trading and your net income will be that less the commission costs
at the end of the year you deduct your allowance for capital gains
does that really need software?
IG will tell you how much you made, personal tax calculators (or even HMRC) will do the rest

 

[icarus701]

Thanks malaguti,

New to this. A couple of questions tho.

What about the quantity of trades? For instance if i'm doing 100's a month/qtr, 10's a day (scalping) would seem like a bit of a head ache woking out the gains/losses manually. I know IG give you a PnL worksheet for individual trades but it still doesn't give a total PnL figure for say a date range.

The second issue is do you have to take into consideration the length of time and frequency you trade a specific security for tax purposes, or is it as you say just profit-losses=taxable income?

As you say I'm probably over complicating things, I hope so 🙂

 

[malaguti]

Thanks malaguti,

New to this. A couple of questions tho.

What about the quantity of trades? For instance if i'm doing 100's a month/qtr, 10's a day (scalping) would seem like a bit of a head ache woking out the gains/losses manually. I know IG give you a PnL worksheet for individual trades but it still doesn't give a total PnL figure for say a date range.

The second issue is do you have to take into consideration the length of time and frequency you trade a specific security for tax purposes, or is it as you say just profit-losses=taxable income?

As you say I'm probably over complicating things, I hope so 🙂

HMRC doesn't care..
1 trade or 1000 trades. 1 second to 1 year, its all that's left that matters..you just have to work out the period..april to april
Now YOU on the other hand, may need the trade by trade information for your own purposes. this is your only source of income, treat it as a business. your losses, where did you go wrong..your gains, how could they be improved
nothing to do with tax its all for you

as long as you can substantiate your total net income (from IG statements) and corroborate that with your bank statements HMRC wont be going through each trade or ask you to back up

 

[icarus701]

Cheers malaguti.

So let me get this straight. Say I buy share, A for ex. and trade it multiple times over a week. All I have to do is add the profits and and subtract the losses to determine whether it's a profit or loss? There's no time restriction where I can't re-enter the share due tax issues otherwise if i did the tax would have to be calculated differently?

Appreciate your idea of using the trade history as a snapshot of performance, thanks.

 

[malaguti]

Cheers malaguti.

So let me get this straight. Say I buy share, A for ex. and trade it multiple times over a week. All I have to do is add the profits and and subtract the losses to determine whether it's a profit or loss? There's no time restriction where I can't re-enter the share due tax issues otherwise if i did the tax would have to be calculated differently?

Appreciate your idea of using the trade history as a snapshot of performance, thanks.

there is only one under UK law that i'm aware of, its the bed and breakfast rule..I'll get a link for it. you need to be very mindful of this one. the idea is not to keep buying and selling the same share

https://wealth.barclays.com/en_gb/s...tor/dont-get-caught-by-capital-gains-tax.html

in all fairness though, i was unaware of this rule and would have done just that, but i was never ever penalised for it
best to avoid it though if you can. there is a similar US ruling, cant remember its name. the idea behind it is to stop you from offsetting losses which you can with CFDs

 

[icarus701]

I would have replied sooner malaguti but dragged away.

If i'm interpreting the bed and breakfast rule correctly, to comply you shouldn't trade the same share more than once in a period of 30 days. This seems to be at odds with some traders who from what i recall specialise in a single share, for example AAPL. These guys are in and out multiple times a day scalping. Also what about other platforms, fx, index trading, commodities, does the 30 day rule apply there too?

 

[malaguti]

I would have replied sooner malaguti but dragged away.

If i'm interpreting the bed and breakfast rule correctly, to comply you shouldn't trade the same share more than once in a period of 30 days. This seems to be at odds with some traders who from what i recall specialise in a single share, for example AAPL. These guys are in and out multiple times a day scalping. Also what about other platforms, fx, index trading, commodities, does the 30 day rule apply there too?

http://www.trade2win.com/boards/general-trading-chat/213588-irs-tax-500-obviously-unfair.html
Here's a link to a post re the US equivalent called the wash sale rule

As I mentioned earlier, i've never been penalised for it, and in my circumstances it would be extremely unlikely if i sold shares in a company would I be buying them back in 30 days.
I thought it was more around the tax year end where it was really frowned upon which is when you need to be working out your capital gains and where you are selling a part of a holding rather than all; (however the link above re the US equivalent makes me think this is incorrect, but I also think the US equivalent is far more stringent than the UK ruling).

I would advise speaking to HMRC in all honesty. You don't need any particular software, you just need to be aware of this rule and when it applies

I'm pretty certain it only relates to shares. Unit trusts and ETFs are considered as shares. So if your commodity was an ETF of a commodity, such as PHAU, this is considered as shares and would apply

Now, all of this is because of one thing..you are using CFDs (or shares, but CFDs is considered the same for CGT)
if you were spreadbetting, you would have none of these issues, you realise this I hope

sorry to be vague on this bed and breakfast rule. It's not widely known and there was some time when I knew nothing of it. anyone who is in and out of apple, may well be doing it in complete ignorance of this and when it applies

I'll try and find out more. I'll PM you if I get anything.

 

[icarus701]

Thanks malaguti,

I think you're right, the B+B rule applies more to the tax year end. As for the US version, (wash sale) they get arsey if you don't have sufficient funds in your account due to clearing. I think there's a minimum you need in your acc at all times if you want to day trade. If you mess this up they can stop you from trading for a certain amount of time.

The reason(s) I'm thinking of going down the CFD route are several.

Because it would be my only form of income it would need to be taxed, I think this goes for spread betting too, if it's your only form of income. So it wouldn't matter which platform was chosen. Correct me if I'm wrong here.

CFD trading is based on the real underlying price of the security, also spreads are tighter. Some of the spreads on spread-bets look ridiculous, especially if you want to day trade.

Anymore information you could provide would be appreciated, PM or otherwise.

Cheers