Taxation & National Insurance question - UK Trader/Investor

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Old Feb 27, 2017, 9:11pm   #1
 
7 Posts
Joined Aug 2015
Taxation & National Insurance question - UK Trader/Investor

Good evening all.

I have been turning a profit mainly through spread betting and some trading and investing in my stocks and shares ISA for about 18 months now.

I am a single male and UK citizen for tax puroposes. I have one other source of income from a rental property which comes no where near to my personal income tax allowance, (the latter is £11,000 this year I believe). I complete a self assessment form every year for the rental income.

I recently had my 59th birthday, with the new pension rules I am not eligible to claim state pension until I am 67. Being aware that I have had a shortfall in the number of years to qualify for a full state pension I decided to get a pensions report from the National Insurance office to see how the land lies. By now you're probably thinking this guy is writng in the wrong forum or he should be getting on to HMRC. However, please bare with me I will get on to how this relates to my trading/investing in a moment and how you may be able to help me.

The report informed me that I needed to make up seven years of NI contributions to qualify for a full state pension of £155 per week. Based on my current record that payment would only be £105. So my options to qualify for a full pension are:

1) Find employent for the next seven years! (Which I financially do not need, not to mention the mental and spiritual disadvantages.... only joking:-)
2) Pay voluntary NI contributions of approximately £4900! (7 x £700)
3) Find self employment for the next seven years and pay national insurance this way. I understand that there is a lower earnings limit below which one is not liable to pay NI. If I recall correctly it is £5,824, however if one does fall in to this catergory there is an option to pay volantary contribution as a self employed person. This currently amounts to £134 per annum, considerably less than the £700 per annum I would need to contribute under my current status.

Being aware of the astuteness of the members of T2W I have a feeling you all know where I'm going with this :-)

Number 3) is my preferred option. What I have in mind is to open and ordinary share dealing account and fund it and register as a self employed trader. I can then just copy the trades I do in my spread betting or ISA account keeping the profits lower than the lower earnings limit for national insurance. This will keep me below the freshold for being assessed for national insurance on profits and below my personal tax allowance including my rental income.

My only concerns are that my understanding of UK taxation is that gains from trading are categorised as income whereas gains from investing are subject to CGT. My trades in the proposed share dealing account would be swing trades therefore, would the profits be subject to CGT and would I still be able to opt in to voluntarily paying national insurance contributions as a self employed person?

If you got this far, thank you very much for your time and a bigger thank you in advance if you can offer some advice. Peace.
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Old Mar 3, 2017, 6:48pm   #2
Joined Feb 2017
Quote:
Originally Posted by dingerx View Post
Good evening all.

I have been turning a profit mainly through spread betting and some trading and investing in my stocks and shares ISA for about 18 months now.

I am a single male and UK citizen for tax puroposes. I have one other source of income from a rental property which comes no where near to my personal income tax allowance, (the latter is £11,000 this year I believe). I complete a self assessment form every year for the rental income.

I recently had my 59th birthday, with the new pension rules I am not eligible to claim state pension until I am 67. Being aware that I have had a shortfall in the number of years to qualify for a full state pension I decided to get a pensions report from the National Insurance office to see how the land lies. By now you're probably thinking this guy is writng in the wrong forum or he should be getting on to HMRC. However, please bare with me I will get on to how this relates to my trading/investing in a moment and how you may be able to help me.

The report informed me that I needed to make up seven years of NI contributions to qualify for a full state pension of £155 per week. Based on my current record that payment would only be £105. So my options to qualify for a full pension are:

1) Find employent for the next seven years! (Which I financially do not need, not to mention the mental and spiritual disadvantages.... only joking:-)
2) Pay voluntary NI contributions of approximately £4900! (7 x £700)
3) Find self employment for the next seven years and pay national insurance this way. I understand that there is a lower earnings limit below which one is not liable to pay NI. If I recall correctly it is £5,824, however if one does fall in to this catergory there is an option to pay volantary contribution as a self employed person. This currently amounts to £134 per annum, considerably less than the £700 per annum I would need to contribute under my current status.

Being aware of the astuteness of the members of T2W I have a feeling you all know where I'm going with this :-)

Number 3) is my preferred option. What I have in mind is to open and ordinary share dealing account and fund it and register as a self employed trader. I can then just copy the trades I do in my spread betting or ISA account keeping the profits lower than the lower earnings limit for national insurance. This will keep me below the freshold for being assessed for national insurance on profits and below my personal tax allowance including my rental income.

My only concerns are that my understanding of UK taxation is that gains from trading are categorised as income whereas gains from investing are subject to CGT. My trades in the proposed share dealing account would be swing trades therefore, would the profits be subject to CGT and would I still be able to opt in to voluntarily paying national insurance contributions as a self employed person?

If you got this far, thank you very much for your time and a bigger thank you in advance if you can offer some advice. Peace.
The points you raise about CG are right and most likely to apply to you unless trading is basically your only source of income and has been for a while and you make many trades.

Perhaps you could set up a company, fund it, open a corporate account with a broker (normally quite a bit of paperwork with the broker), and employ yourself, paying a proper salary and even a bonus before distributable profits calculated. You then essentially become a PAYE trader working for an investment fund paying class 1 NIC.
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Old Mar 5, 2017, 10:55pm   #3
 
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Joined Aug 2015
dingerx started this thread
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Originally Posted by Fill_Or_Kill View Post
The points you raise about CG are right and most likely to apply to you unless trading is basically your only source of income and has been for a while and you make many trades.

Perhaps you could set up a company, fund it, open a corporate account with a broker (normally quite a bit of paperwork with the broker), and employ yourself, paying a proper salary and even a bonus before distributable profits calculated. You then essentially become a PAYE trader working for an investment fund paying class 1 NIC.
Thank you for taking the time to read my post and reply FOK, your suggestion may be a viable solution which I will be mindful of going forward. I am trying to establish if there is a simpler option though and I'm probably not as clear in my mind about my situation as you so kindly gave me credit for.

Owing to a lack of capital my profits from spread betting and swing trading in my ISA have been very small to date. My partner is the main breadwinner in our household but I still need to draw from the profits from time to time. Therefore, compounding gains is proving to be a slow process. I could easily arrange for profits from swing trading in an ordinary stock broker account or perhaps a CFD account to exceed the aggregate profits in the tax free accounts. In fact it will do with out making any special arrangements as I will need to move some of the capital over from the tax ree accounts to the taxable account/s. Thereby, ensuring that my main source of profit is taxable. I am sure that HMRC would categorised the profits from my style of trading as capital gains. However, that would not be a problem as my projected profits would be below the exempt amount for CGT and also the lower profits limit for NI as a sole trader. What I do not know is whether I can operate a business on a sole trader basis and be eligible to pay NI (voluntarily in my case) when the only income of the business is from capital gains. Baring in mind that I am trying to save the difference of £566 between the volutary NI contributions I need to pay (£700 pa) under my current status and self employed volutary contributions (£134 pa) under my prospective new status, I think this is the crux of the matter. If anyone can shed any light on this I would be most grateful.
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Old Mar 6, 2017, 9:59pm   #4
gc1
Joined Jun 2005
If you are 59 now then your state pension age will be 66 not 67.
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Old Mar 8, 2017, 8:19pm   #5
 
7 Posts
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Originally Posted by gc1 View Post
If you are 59 now then your state pension age will be 66 not 67.
You are quite right sir, thank you for the correction!
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Old Sep 27, 2017, 6:15pm   #6
 
9 Posts
Joined Aug 2016
Hi Dingerx,

I know I may be going slightly off tangent with the broad thrust of your thread here, but can I ask who your swing trading ISA account is with, as I too want to start trading with funds that I have in an ISA account?

Just wanted to know if there were any preferred swing trading ISA account dealers in terms of cost per trade, commissions/fees, inactivity fees etc.? Also, does your swing trading ISA account provider have access to both the US & UK Equities market, as well as easy locates/finds if/when wanting to short US/UK stock?

I also notice that you have a spread betting account and a swing trading ISA account? Any particular reason/benefit?

Thanks in advance.
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Old Sep 29, 2017, 8:49am   #7
Joined Jul 2010
www.traderstaxclub.co.uk is a low cost way to clarify taxes on trading.
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