Paying taxes for trading

[James2024]

Hi,

Do I need to pay taxes for trading in a non-ISA account if I make profit through trading in that account - even if I am not withdrawing my profits and not spending it? That is if I am re-investing my profits - if any, again and again?

My account manager in eToro told me that as soon as I close a profitable trading position in a non-ISA account, I am liable to pay taxes . He said that the personal allowance for capital gains tax is £6,000 in a financial year (which I read in HMRC website also). And that it is a flat 20% tax that I have to pay for any profits I may make beyond £6,000 in a non ISA account in a financial year. Is this information correct?

Also, will I get a separate personal tax allowance of £12,570 apart from this £6,000 personal allowance for capital gains tax while calculating my taxes for my full time job salary?

Thanks a lot,
James

 

[tomorton]

James, I'm not a tax expert but my understanding on your three points is -

Yes.

Yes.

Honestly don't know.

(I'm spreadbetting so my opinions are just that, I can't speak about CGT from direct experience).

 

[James2024]

Thanks @tomorton

 

[BigDeal]

James, don't forget that any CGT libility is calculated over the financial year, and so losses and expenses can be offset against gains before declaring.
It depends upon your marginal rate of tax as to the level of your CGTax rate (i.e. you add your taxable gains to your taxable income to work this out).

Your personal (income) tax allowance is separate to the CGT allowance, as you have noted.

If you are able to, I would recommend loading up your ISA to the max (if you haven't already) and continue to do so going forward because CGT allowance next yeur is only £3K, and dividend allowance is also being slashed (£1000 this year, £500 next year)

 

[James2024]

Thanks @BigDeal . So if I am able to make profits on top of my £25,000 ISA investment, can I deposit £20,000 every financial year to the ISA account and regardless of the profits I may make every year from the ISA account, I need not pay any CGTax at all every year for the profits in the ISA account?

 

[trilobite]

All gains in an ISA are free of CGT and income tax. The annual subscription limit of £20K is irrespective of any profit or loss within the account.
Tax laws of course can and do change, but that's the situation as of now.

 

[James2024]

Thanks @trilobite So, just to confirm, I can keep on depositing new £20,000 every financial year to the ISA account and regardless of the profits I make from the ISA account, I need not pay any Capital Gains Taxes for the ISA account each and every year as per the current laws now - right? So, one day if my ISA account grows to say £100,000 or £200,000 (with the yearly £20,000 deposits and any profits) or more, I will not be still paying CGTax for my ISA account each and every year - no?

 

[trilobite]

Thanks @trilobite So, just to confirm, I can keep on depositing new £20,000 every financial year to the ISA account and regardless of the profits I make from the ISA account, I need not pay any Capital Gains Taxes for the ISA account each and every year as per the current laws now - right? So, one day if my ISA account grows to say £100,000 or £200,000 (with the yearly £20,000 deposits and any profits) or more, I will not be still paying CGTax for my ISA account each and every year - no?

Correct, an ISA also has the advantage that you do not need to worry about reporting any gains, interest or other income. However, don't take my word for it, do your own research to confirm.

 

[James2024]

Correct, an ISA also has the advantage that you do not need to worry about reporting any gains, interest or other income. However, don't take my word for it, do your own research to confirm.

Thanks @trilobite I called HMRC. They said that I should speak with my ISA provider for queries related to ISA.