Tax Question - LTD or not?

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Old Oct 7, 2013, 12:16pm   #1
 
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Joined Aug 2010
Tax Question - LTD or not?

Hi everyone,

I'm about to return to swing/day trading after a while off.

I've decided to trade in shares, I have the time to keep up with the news and can trade during the day, I'm based in the UK.

My question is regarding tax, I'm currently a higher rate tax payer and don't want to get screwed over by the tax man and want to get my ducks lined up.

Am I correct in that I'll be taxed at 40% on any profits and will have to declare them on my tax return?

I'm not interested in spread betting or CFD's so that's out.

How about trading through a LTD company?

I have a dormant company already set up with bank account ready to go from a venture I didn't start so could use that, also my wife is down as a director and is currently a basic rate tax payer with some allowance left until the threshold for higher rate.

I don't need to withdraw funds so can leave them in the company to grow, and also believe trading through a LTD company I could claim expenses.

Many thanks.
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Old Oct 21, 2013, 1:24am   #2
 
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Joined Dec 2011
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Originally Posted by MF2015 View Post
Hi everyone,

I'm about to return to swing/day trading after a while off.

I've decided to trade in shares, I have the time to keep up with the news and can trade during the day, I'm based in the UK.

My question is regarding tax, I'm currently a higher rate tax payer and don't want to get screwed over by the tax man and want to get my ducks lined up.

Am I correct in that I'll be taxed at 40% on any profits and will have to declare them on my tax return?

I'm not interested in spread betting or CFD's so that's out.

How about trading through a LTD company?

I have a dormant company already set up with bank account ready to go from a venture I didn't start so could use that, also my wife is down as a director and is currently a basic rate tax payer with some allowance left until the threshold for higher rate.

I don't need to withdraw funds so can leave them in the company to grow, and also believe trading through a LTD company I could claim expenses.

Many thanks.
Hello there ,
Well , i can ONLY talk based on Australian tax rules , BUT i am sure it will be the same for the UK .
Yes you will have alot of benefits when trading through a PTY LTD.
The best advise i can give you is , your accountant is the BEST place to start with on this matter.
Cheers,
George
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Old Oct 21, 2013, 6:12am   #3
Joined Jun 2012
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Originally Posted by MF2015 View Post
Hi everyone,

I'm about to return to swing/day trading after a while off.

I've decided to trade in shares, I have the time to keep up with the news and can trade during the day, I'm based in the UK.

My question is regarding tax, I'm currently a higher rate tax payer and don't want to get screwed over by the tax man and want to get my ducks lined up.

Am I correct in that I'll be taxed at 40% on any profits and will have to declare them on my tax return?

I'm not interested in spread betting or CFD's so that's out.

How about trading through a LTD company?

I have a dormant company already set up with bank account ready to go from a venture I didn't start so could use that, also my wife is down as a director and is currently a basic rate tax payer with some allowance left until the threshold for higher rate.

I don't need to withdraw funds so can leave them in the company to grow, and also believe trading through a LTD company I could claim expenses.

Many thanks.
MF, unless I've got the wrong end of the stick, if you're dealing with the underlying shares then you're liable to CGT and not income tax IMO. I gather from what you're saying that this will be a sideline. Even if you're classed as a trader with no other source of income, the courts have ruled against people being classed as 'traders' as an actual self employed trade unless they pass a number of tests (based on the badges of trade concept), one of which being generally whether you have customers or not (as most 'proper' trading entities would in some form). This is because there are numerous employed people out there who trade in shares and who would like to take their endless losses against their PAYE - the Revenue much prefers these people classed as CG payers basically! There is a case where a dentist was doing much the same thing and was not allowed to class losses from shares as self employment and had to just carry forward capital losses. Though as a successful trader, this can work in your favour since CGT rates are lower for your gains.

As a limited company incorporated to trade shares, you're liable to corporation tax even if you try and be funky with the retained earnings in terms of your dividend liability and distributing them to yourself over a number of years (but then you have Close Investment stuff going on). You could pay your wife a salary etc in this company to mitigate some tax liab, but doesn't sound worth it in your case. Anyway, lots of admin with a company when you sound like a CG payer to me so why worry?
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