Trading For A Living

[ambitio]

However if the IR beleives you earn your living from Bookmakers they can deem your winnings as income. You are then liable for income tax.

I thought "tax-free" winnings was to good to be true

Hi Jukes,

You can set up a UK Limited Company. This is likely from April to be the most Tax Efficient way due to NI.

It works as follows:

1) Pay yourself an income upto the Tax Threshold circa £4500. This is then deducted from the Companies profits.

2) Any profits are then taxed at 20 or 30% depending on assests traded.

3) Pay yourself in dividends. Of course this is classed as income, but no tax will be liable upto the higher rate threshold. Exceed this and you effectively pay 22.5% extra. Just leave the money in the Company for over two years then shut down the Company at a cost of 10%. Start again...

This is the best way then. Its just that IT contractors have been doing this for years only to be shafted by IR35! I think eventually all profits will have to be taken as salary which I understand is roughly another 12% loss. Ah well...

 

[JonnyT]

No IR35

IR35 doesn't apply to Companies trading shares or CFDs, or futures.

If you trade just CFDs and Futures you may be able to use the small companies Tax Rate of 20% for profits less than about £1.5m. The alternative is 30%.

If you are married or have a parnter make them an equal shareholder to save even more tax...

JonnyT

 

[farzin]

One thing appears to me that has been missed out in all posting is that IR will look at the person who made the decison on trade rather than geographical position of the company. In other words if you even open a company off shore, as soon as you start trading for that company inside the UK, the Company will be liable for tax.
I liked JonnyT's idea for setting up a UK company. This seems to be the best solution.
Or perhaps you can work for couple of hours in MaCDonalds and claim that it is your main job and you do spreadbetting on your spare time

 

[Splurge]

oh dear.....................

 

[catsdad100]

When I started daytrading for a living the IR refused to recognise it as a business so I could not claim expenses. After a year I turned to spreadbetting. As far as I can see it is betting and thus not taxable. Say I put £1000 on a horse at 100/1, and won £100k. If my annual income was otherwise £50k, this bet could be deemed to be my main source of income for the year and so could be taxed - I think not. I have yet to hear of anybody being taxed on betting - but perhaps I am wrong. As far as return on capital goes, I am surprised at all the cold water that is poured on any ideas of making more than £100 per day on any less than £100k capital. Using £2k in a SB account I can generally average £200 per day. This only involves 10 points of movement (plus the spread) on things like HBOS, BARC, LLOY, GSK etc. If you look at their movements each day this is not relying on being particularly smart. I reckon if you get the best realtime info available and take care it is certainly possible to make very good returns.

 

[julesrules]

it is a respectable trader can easily make 10% profit on his capital employed daily. im currently at 18% ROI although i made 23% today i dont mind paying a bit of tax but 40% is far too high

 

[JonnyT]

Agreed,

I made 8.25 points, just over $400 per contract in 90 minutes trading the S&P emini's today for example. This isn't one of my best days, nor my worse.

To do this you need about $1500 per contract, so you could say I made 25% in one day.

However that is way too simple, you have to have enough capital for drawdown and living if that is what your trading is for. I personally think £5k per ES contract is fine for scalping (baring major disasters, always have a stop in place) once you have earned your stripes.

Now for example 5 points per day (well possible, though not easy) means $5000 per contract per month. Therefor with a pot of £25k you could make $25000 per month. Need I say more.

JonnyT

 

[JonnyT]

Jules get real, pay you taxes and smile.

JonnyT

 

[julesrules]

im just looking at ways to limit my tax liability.
20-30% would be better

 

[Trader333]

Risk Level

JohnnyT,

What risk did you have to get your 8+ points on the S&P ? The reason I ask is that I trade the S&P as well.

Thanks


Paul

 

[neil]

Jules

Go to jail without passing "GO"

 

[Market Wizard]

Tax and trading for a living.

Traders

Many traders that i know have opened up a "Trust Fund" account abroad, and also opened a trading account with a broker under the trust fund. All trades are placed on behalf of the trust fund, all monies are offshore, the traders are paid by the trust fund for analytical/trading work conducted on behalf of the offshore company. The trader in the uk pays tax as a self employed and posseses a debit card for expenses.

Any cash that comes into the UK is taxable, but when all you traders start earning big bucks, paying UK Tax will not be a problem because you will want to enjoy your money legitimately.

All the best to you all.

 

[shiva]

Trading..depends how you trade and what with...cfd,s spreadbets..and how you judge the market but it,s down to you how much is a good income to you......at the end of the day if you treat it like a business then you tend to do better.

 

[farzin]

Market Wizard

Well the point is that if you are UK domicile (UK born or was resident in the UK for over 17 years) which I assume this applies to most of UK traders, even if you do NOT bring the money to the UK you still must declare it to the IR as your income and therefore pay tax on it!!
Well why don't we spend more time on making money rather than finding a way to escape from law which is not really honourable

 

[cjam]

Personally, 15% p.a. average profit target - not an unreasonable figure and provides a 10% p.a. income and 5% inflationary growth allowance. Actual minimum fund size required depends upon the income level you expect.

During pre-resign years, combined with modest savings of perhaps 5% p.a. equates to a fund doubling every 4 years.

You also need a cash reserve to see you through dry periods (possibly several years), that floats up and down relative to out/under performing periods, and a good downside risk limitation money management strategy (I outline mine at http://www.cjam.pwp.blueyonder.co.uk if your interested) else you could end up back with the 48/4'ers (48 weeks in an office and 4 weeks hol's).

Top end, I think 50% p.a. is very ambitious; 30% is a more realistic level that could have been achieved over the last 18 years or so trading the NASDAQ. I suspect that for the next decade 20% might be a more realistic top end expectation.

However having said that I dont day trade, but instead short term trade (perhaps spending a total of 1 to 2 hours each month) and p.a. returns could be increased possibly 50% or so if the time/effort were invested on a daily basis. Personally a possible 50% higher income for alot more time/effort is not justifiable in my case.

 

[JonnyT]

Hi Paul,

Yesterday I traded 5 minute charts and took two trades. I risked 1.75 points per trade. I was looking for breakouts/breakdowns. The basic premise is if it doesn't follow through look for a reverse opportunity.

I did however turn down 4 trades, three would have been profitable (

JonnyT

 

[Trader333]

JohnnnyT,

I use a similar system of breakout either up or down and on 5min charts also. Thanks for replying.

Cheers


Paul

 

[JonnyT]

You know what they say Paul 'Great minds think alike'

My real names Paul aswell!

JonnyT (Short for Jonny Tits but its a long story)

 

[chaders]

Hi All can anyone tell me the tax situation for trading FX is it
the same as stocks. as you are not buying anything just changing money?

 

[JonnyT]

Same situation I beleive on the premise you are just trading cash with index futures as there are no deliverables.

JonnyT