uk tax laws on forex

This is a discussion on uk tax laws on forex within the Forex forums, part of the Markets category; Is forex subject to cgt /income tax in the uk? Im not spreadbetting. Doesnt seem to be much on the ...

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Old Jun 6, 2010, 11:02am   #1
 
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uk tax laws on forex

Is forex subject to cgt /income tax in the uk? Im not spreadbetting. Doesnt seem to be much on the net.
Thanks
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Old Jun 6, 2010, 12:43pm   #2
 
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Re: uk tax laws on forex

you need to make money in order to be taxed
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Old Jun 6, 2010, 12:56pm   #3
 
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Re: uk tax laws on forex

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Originally Posted by N Rothschild View Post
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?
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Old Jun 6, 2010, 1:14pm   #4
Nut
Joined May 2006
Re: uk tax laws on forex

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/
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Old Jun 6, 2010, 3:40pm   #5
Joined May 2001
Re: uk tax laws on forex

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.
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Old Jun 6, 2010, 10:32pm   #6
 
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Re: uk tax laws on forex

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Originally Posted by stevespray View Post
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.
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Old Jun 7, 2010, 7:19am   #7
Joined May 2001
Re: uk tax laws on forex

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.
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