Tax liabilities from foreign investments
I've recently started trading US stocks from the UK with a US trade account, and im just trying to clarify my tax situation. I had to sign the W8-BEN form when opening the account, so I assume im exempt from US tax? At what point does the UK start taxing me?
Thanks in advance.
It is a bit late responding to this post, but it might be of interest to someone else..
The UK has a Tax treaty with the US, therefore if you are a UK domiciled resident you will be subject to UK Taxation on any gains or income from US investments. Generally speaking most developed countries have Tax treaties with the UK, therefore the following guidelines largely apply to overseas investments by UK residents.
When calculating your Tax gains, losses or income from US transactions, you basically apply the same rules that you would use when determining your UK tax liabilities. It is important to note that when calculating your acquisition costs, disposal values or income, you must use the GBP/USD Foreign Exchange rate on the date the transaction occurred, in order to determine the value of the transaction in British Pounds on the transaction date.
After you have worked out the value of your transactions in British Pounds on the date they occurred, to determine your CGT liabilities you then apply the UK HMRC share identification rules (same day, Bed & Breakfasting, etc), reduce gains by current year losses fully utilising losses if gains are greater than current year losses, however if using carried forward losses you only reduce your gains to the annual exemption threshold. For the Tax year ending 5 April 2008 you also have to calculate Indexation and Taper Relief.
In the UK you have to make a Self Assessment Capital Gains Tax return (SA108) if your Chargeable Gain after losses is greater than the Annual Exemption threshold; or if you want to claim a loss; or if the total disposal proceeds is greater than four times the annual exemption threshold i.e. for the tax year ending 5 Apr 2008, if you total value of the assets that you disposed of (e.g. shares that you sold) is greater than £36,800 you have to make a CGT Tax return regardless of whether or not you made a profit.
With regards to Overseas Income, from for example Dividends, these have to be declared on your Self Assessment Tax Return forms. If the overseas income from dividends is less than £300, you can simply declare this on your normal Self Assessment Income Tax return form (SA100) in box 5. If you have other sources of income this will have to be declared on the Self Assessment Foreign Pages (SA106).
There is a website called
timetotrade that calculates UK Capital Gains & Income Tax liabilities. It supports overseas investments, pre and post 2008 HMRC share identification rules, Taper Relief, Indexation, loss allocation, calculates your chargeable gain, total liable to taxation after annual exemptions, then notifies investors when they have to submit a UK HMRC CGT return. If
timetotrade flags that you have to make a tax return, you can then model disposals to try and reduce your CGT liabilities eg. model selling a loss making position to see if that reduces your Tax liability. Should you have to submit a UK CGT Tax Return, you can then use
timetotrade to generate the completed HMRC Self Assessment Capital Gains Tax return form (SA108) as a pdf.
