uk tax laws on forex

[Scotty2Cues]

Is forex subject to cgt /income tax in the uk? Im not spreadbetting. Doesnt seem to be much on the net.
Thanks

 

[N Rothschild]

you need to make money in order to be taxed

 

[Scotty2Cues]

you need to make money in order to be taxed

genius.

but do i need to make money before getting a yes or no answer to the question :

Is Forex subject to CGT?

and if not, what is the answer?

 

[Nut]

Simple answer yes check out this link, forex trading is considered to be the same as trading shares. You put your capital at risk make a profit and we tax that profit. If you make a loss then that loss is deductable against any other capital gain.

My best advice is get an accountant.

http://www.hmrc.gov.uk/cgt/

 

[stevespray]

Sod the accountant - it's pretty darn simple....

If you speculate on forex (non spreadbet) and make money then you can be taxed on that in the form of CGT. You do however have a £10,000 personal allowance so you only get taxed on profits over £10k in any one tax year. This scenario assumes that your speculation on forex is not your sole source of income and that you pay some Income Tax via a job of some kind.

If forex trading became your sole income then the IR will most likely look at your situation differently. In that situation you would be better off registering as a self employed financial trader. You would then just produce a profit and loss account just as you would for any business which you were running. This is very simple and you'd be classed as a 'Sole Tradership'. This would allow you to make significant deductions for expenses like a room in your house for use as an office as well as computer equipment, software, data fees, electricity and internet fees. You would then be assessed for Income Tax on your net profits.

Personally I'd suggest spreadbetting as a consideration. I'm no expert (on tax advice) but I know a hell of a lot of successful traders who make large sums spreadbetting and pay no tax whatsoever. Most of the spreadbetting firms now offer very tight spreads on the major crosses and in my experience you'd be hard pressed to get the same leg in / leg out spreads with direct access platforms especially in fast markets. You can certainly control risk to a higher degree with the firms which offer the best stop loss filling policies in fast markets.

How much are you planning on making and will this be your sole income?

Hope this helps,

Steve.

 

[Scotty2Cues]

Sod the accountant - it's pretty darn simple....

If you speculate on forex (non spreadbet) and make money then you can be taxed on that in the form of CGT. You do however have a £10,000 personal allowance so you only get taxed on profits over £10k in any one tax year. This scenario assumes that your speculation on forex is not your sole source of income and that you pay some Income Tax via a job of some kind.

If forex trading became your sole income then the IR will most likely look at your situation differently. In that situation you would be better off registering as a self employed financial trader. You would then just produce a profit and loss account just as you would for any business which you were running. This is very simple and you'd be classed as a 'Sole Tradership'. This would allow you to make significant deductions for expenses like a room in your house for use as an office as well as computer equipment, software, data fees, electricity and internet fees. You would then be assessed for Income Tax on your net profits.

Personally I'd suggest spreadbetting as a consideration. I'm no expert (on tax advice) but I know a hell of a lot of successful traders who make large sums spreadbetting and pay no tax whatsoever. Most of the spreadbetting firms now offer very tight spreads on the major crosses and in my experience you'd be hard pressed to get the same leg in / leg out spreads with direct access platforms especially in fast markets. You can certainly control risk to a higher degree with the firms which offer the best stop loss filling policies in fast markets.

How much are you planning on making and will this be your sole income?

Hope this helps,

Steve.

ok thanks alot! I originally considered spreadbetting but started to read about how they can manipulate prices, freeze platforms, problems getting filled etc and it put me off spreadbetting.

Im a newbie and still demoing (this is my 3rd month) but will go live July/August with a ECN broker if profitable again this month on demo. It wont be my sole income although Im working on making it so one day. The plan is to compound profits. Aiming for 10% monthly return.
Thanks again.

 

[stevespray]

My advice would be to start by using a spreadbetting account rather than an ECN. Learn the ropes and experience the different market conditions in a controlled manner. Don't run before you can walk. Aim to break-even (I know it sounds boring!) in the first couple of months. Capital Spreads or Dealing Desk are your best bet.

Worry about tax once you've made £50k spreadbetting.

Good Luck!

Steve.

 

[Representative]

Hello everyone,

I also have a question about the tax laws in the UK regarding forex.
I am a Dutch student resident in the UK. I still hold my Dutch passport, but mostly live in the UK (at least 10 out of 12 months). I will be starting in forex trading somewhere this summer. I was wondering whether or not it is of interest for a student to register as self employed trader? Or should I wait until I make at least 10,000 pounds and more?

Thanks very much,

Rep

 

[stevespray]

Hello everyone,

I also have a question about the tax laws in the UK regarding forex.
I am a Dutch student resident in the UK. I still hold my Dutch passport, but mostly live in the UK (at least 10 out of 12 months). I will be starting in forex trading somewhere this summer. I was wondering whether or not it is of interest for a student to register as self employed trader? Or should I wait until I make at least 10,000 pounds and more?

Thanks very much,

Rep

Firstly I should say that I am no tax expert but here is what I would suggest...

If you are resident in the UK then open a Spreadbet account. If you make some money buy a few more books (on trading perhaps) and maintain your student status whilst continuing to spreadbet. Don't register with the IR as anything. In fact dont even contact them. Chances are you will get under the radar. If they do happen to come knocking then tell them that you are still a student. As you are from the EU there isnt much they can do as you have the right to be here. You're more likely to be asked questions by the the tax authority from your own country - obviously you would just tell them that you are still studying abroad.

 

[Representative]

Firstly I should say that I am no tax expert but here is what I would suggest...

If you are resident in the UK then open a Spreadbet account. If you make some money buy a few more books (on trading perhaps) and maintain your student status whilst continuing to spreadbet. Don't register with the IR as anything. In fact dont even contact them. Chances are you will get under the radar. If they do happen to come knocking then tell them that you are still a student. As you are from the EU there isnt much they can do as you have the right to be here. You're more likely to be asked questions by the the tax authority from your own country - obviously you would just tell them that you are still studying abroad.

Thanks steve!

Why should I go for spread betting and not with a forex broker (like fxcm)? I understand these are 2 different things.

Many thanks,

Niels

 

[Jason Rogers]

Thanks steve!

Why should I go for spread betting and not with a forex broker (like fxcm)? I understand these are 2 different things.

Many thanks,

Niels

If you're a UK resident then it would be more advantageous for tax purposes to go with the spreadbet account. FXCM has spreadbet accounts with forex trading specifically for this reason. It's basically the same as the regular forex account with a spreadbet wrapper so that the profits are free of UK capital gains taxes.

 

[stevespray]

FXCM's spreads seem too wide. I'd recomend CS or DD or Cantors.

 

[diy_]

genius.

but do i need to make money before getting a yes or no answer to the question :

Is Forex subject to CGT?

and if not, what is the answer?

I could be wrong but I think he's implying that you cannot make any money from forex trading. But all the websites I've seen stated that you dont pay any tax otherwise you could have use spread betting to offset gains from other source of income eg housing market.

 

[Representative]

Many thanks for the replies!

 

[t2wfx]

Great info for me too. Thanks guys!

 

[Scotty2Cues]

Just out of curiosity, If your only income is from something that is subject to capital gains tax, are you also subject to income tax, or only one tax and which one?
thanking you

 

[PokerPlayer]

Spreadbetting is classed the same way as playing poker, i.e it's gambling.

HMRC don't want to go anywhere near anything that is classed as gambling, as if they made a decision to tax you on your winnings, they would also have to give you tax relief on your losses..

The crucial difference is if you declare yourself a "professional" spreadbettor, then HMRC will argue that you're earning a living from spreadbetting and will want to tax you on it. If you retain your "amateur" status, then it doesn't matter if you make millions, it's a hobby, a recreation activity, call it whatever you like.

The analogy would be a stamp collector who buys a stamp for $200 and over time it increases in value to $20,000, as long as he's not doing stamp trading for a living, then no tax.

Interestingly, in the USA, the IRS will tax you on gambling winnings, and you can get tax relief against your losses... Not too sure I'ld like THAT..

 

[stevespray]

Apparently HMRC are interested in spreadbetting – that’s straight from the mouth of a senior tax inspector at my local tax office down here in sunny Bristol.

What they’re not interested in is folk who just ‘speculate’ as an aside to their main income. They may however be interested in someone who trades full time via spreadbetting. The HMRC say that they have the ability to look at situations on a case by case basis. Reading between the lines I take that to mean that they might attempt to nail you for income tax if i) you are profitable, and ii) if it’s your sole source of income. I’m not aware of a case where they’ve taken court action to actually do this but the tax inspector did tell me that someone in my tax area was registered with them as a ‘professional gambler’ and that this person submitted accounts and paid tax like ‘any other profitable business’. It made me wonder if this person had come to an arrangement with HMRC rather than fighting the case.

The problem for most people who might go into full time spreadbetting is that they probably already have a full time occupation where Income Tax is being paid. Let’s say that Mr Average does a job which pays just over £40,000 per year and, on that basis, he pays around £10,000 in NI and Income Tax all via the PAYE system or by Self Assessment if he is self employed. Sooner or later, once he stops paying any form of direct tax, HMRC will want to know what his current tax status is simply because he is already on their system. This is where the problems could start. HMRC are unlikely to simply accept that Mr Average is now exempt from paying Income Tax (especially if he’s now punting around town in a Bentley Continental GT!)


Steve.

 

[Black Swan]

Apparently HMRC are interested in spreadbetting – that’s straight from the mouth of a senior tax inspector at my local tax office down here in sunny Bristol.

What they’re not interested in is folk who just ‘speculate’ as an aside to their main income. They may however be interested in someone who trades full time via spreadbetting. The HMRC say that they have the ability to look at situations on a case by case basis. Reading between the lines I take that to mean that they might attempt to nail you for income tax if i) you are profitable, and ii) if it’s your sole source of income. I’m not aware of a case where they’ve taken court action to actually do this but the tax inspector did tell me that someone in my tax area was registered with them as a ‘professional gambler’ and that this person submitted accounts and paid tax like ‘any other profitable business’. It made me wonder if this person had come to an arrangement with HMRC rather than fighting the case.

The problem for most people who might go into full time spreadbetting is that they probably already have a full time occupation where Income Tax is being paid. Let’s say that Mr Average does a job which pays just over £40,000 per year and, on that basis, he pays around £10,000 in NI and Income Tax all via the PAYE system or by Self Assessment if he is self employed. Sooner or later, once he stops paying any form of direct tax, HMRC will want to know what his current tax status is simply because he is already on their system. This is where the problems could start. HMRC are unlikely to simply accept that Mr Average is now exempt from paying Income Tax (especially if he’s now punting around town in a Bentley Continental GT!)


Steve.

Steve, you often re-visit this subject, which indicates a healthy personal situation... Folk have to treat the HMRC as the enemy and apply the same gaming rules as they would towards trading. For example, have at least 2 trading accounts; one SB one forex, perhaps trade another extra SB account in the wife's name, or use power of attorny for a friend/associate/trust fund, take advantage of the allowances and the allowance on the simple exchanging of money from one currency to another which can be exempt of tax....If you make enough move you and your operation abroad, temporary or otherwise. IMHO the global currency and profit we pull out of the markets has fook all to do with the authorities..they can just go and print some more... No point in winning at trading and then rolling over..

 

[PokerPlayer]

Hi Steve

HMRC may be interested in spreadbetting (they would say that wouldn't they !) but they can't do Jack unless you're foolish enough to give it the Big 'Un and describe yourself as a professional trader.

Spreadbetting = gambling = no tax liability.

Do you think HMRC is giving tax rebates to the (often quoted) 90% of spreadbetters that lose ? I think not somehow.

Hope you all win massively ! good luck to all