starspacer
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Just an update on this. The above book is for US not UK traders, so don't make the mistake of ordering it unless you are resident in the States.starspacer said:
Sole Trader status
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frugi
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Christmas cheer from the tax man
Not
After nine months the decision has been made as to whether I pay CGT or income tax as a self-employed trader.
So, no generous CGT allowance for me, which is a fair, if personally unwelcome, decision.
Welcome to the world of income tax, self assessment and Class 2 and 4 NI contributions! I bet I have to back date them to April 6 2004 as well. Then there'll be a contents insurance business premium hike no doubt. Still, at least I'll be eligible for the state pension and a mortgage, should I need one.
Edit: D'OH! I also realised after posting this that of course being taxed as self-employed means I have the whole CGT allowance to use AS WELL, as long as I keep the transactions eligible for CGT well away from my main trading account/activities. So, if I'm careful, there are two allowances to be had, i.e about 13k tax free, which is actually very similar to my previous situation. Their roles have simply reversed, to all intents and purposes. I'm happier about the decision now!
Not
After nine months the decision has been made as to whether I pay CGT or income tax as a self-employed trader.
friendly tax man said:
So, no generous CGT allowance for me, which is a fair, if personally unwelcome, decision.
Welcome to the world of income tax, self assessment and Class 2 and 4 NI contributions! I bet I have to back date them to April 6 2004 as well. Then there'll be a contents insurance business premium hike no doubt. Still, at least I'll be eligible for the state pension and a mortgage, should I need one.
Edit: D'OH! I also realised after posting this that of course being taxed as self-employed means I have the whole CGT allowance to use AS WELL, as long as I keep the transactions eligible for CGT well away from my main trading account/activities. So, if I'm careful, there are two allowances to be had, i.e about 13k tax free, which is actually very similar to my previous situation. Their roles have simply reversed, to all intents and purposes. I'm happier about the decision now!
TheBramble
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Don't you also get to claim losses/costs/expenses from up to the previous 7 years?
I'm not SE myself, but seem to remember something along these lines when I was looking at the options....
Frugi - was this decision based on standard broker or SB - or a mixture?
Be an interesting case study to see how the IR would determine on a hybrid trading approach.
Might be a moot point anyway as from April 1st next year they become one with HMCE to become HMRC. They wont be interested in anything other than internal wrangling as the new CEO (David Varney ex. MMO2) cuts the joint workforce by 12.5%.
How to tax sole-trader traders (!) will be the last thing on their minds....
I'm not SE myself, but seem to remember something along these lines when I was looking at the options....
Frugi - was this decision based on standard broker or SB - or a mixture?
Be an interesting case study to see how the IR would determine on a hybrid trading approach.
Might be a moot point anyway as from April 1st next year they become one with HMCE to become HMRC. They wont be interested in anything other than internal wrangling as the new CEO (David Varney ex. MMO2) cuts the joint workforce by 12.5%.
How to tax sole-trader traders (!) will be the last thing on their minds....
Last edited:
frugi
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SB? I don't do that anymore, so I didn't feel the need to mention it, nor indeed my recreational presence at the virtual poker table
I'll be spending the next day or two investigating exactly what I can do with previous futures losses. Yes, I've had some, on occasion They used to fall under CGT jurisdiction and could be rolled over from years ago, but I'm not sure about how they fit into the income tax schedule, as, to be honest, I wasn't expecting the decision just received.
I have a tax book, a generous portion of Thai curry and some wine, so things may become clearer. I'll keep youse informed
Edit: Once I have been in business for a year, at least, trading losses can be rolled forward and set against future profits until they are used. Regarding the older losses, i.e. the ones prior to becoming self-emp, well, I can use them against future Capital Gains. Sweet.
I'll be spending the next day or two investigating exactly what I can do with previous futures losses. Yes, I've had some, on occasion
They used to fall under CGT jurisdiction and could be rolled over from years ago, but I'm not sure about how they fit into the income tax schedule, as, to be honest, I wasn't expecting the decision just received.I have a tax book, a generous portion of Thai curry and some wine, so things may become clearer. I'll keep youse informed
Edit: Once I have been in business for a year, at least, trading losses can be rolled forward and set against future profits until they are used. Regarding the older losses, i.e. the ones prior to becoming self-emp, well, I can use them against future Capital Gains. Sweet.
Frugi,
I take it you are trading full time and hence the decision from HMIT? If that is the case speak to a good accountant and he may well give you some excellent Tax Savings tips. They may include some or all of the following (may be even more):-
Set-up a limited company, summing that your broker will open a limited co. account
Pay your self a salary of £4500 p.a..You do not have to pay class 1 NIC, Class 2 NIC, Class 4 NIC or any NIC, BUT still retain your rights to state pension/benefits. But surely you won't need any.
Take a dividend upto a maximum of £24000 and do not pay any tax on these dividends.
Assuming your profits are more than £50000p.a. but less than £350K p.a you will only pay 19% corporation tax.
If you need more than £30,000 pa to live on or for one-off expenses all you will pay on the dividends is 25% tax.
Frugi you are on to a winner. Go talk to a good accountant.
Good luck (by the sounds of it you don't need any) in your trading.
ps-with all those savings setup a trust (in the UK I hasten to add) and live a life of riley. A good IFA/ Solictor/ Accountant will advise you on the trust.
pps- make your wife a shareholder -take proper advise and double your tax savings
get the spouse to finance IT equipment, data feed software, traning (but you don' t need any?) , research, bookkeeping you get the picture and her shareholdings amy just be acceptable to HMIT.
ppps- ask you accountant for advise on gifting shares in your company to your children.
Oh boy, you have landed on your feet
I take it you are trading full time and hence the decision from HMIT? If that is the case speak to a good accountant and he may well give you some excellent Tax Savings tips. They may include some or all of the following (may be even more):-
Set-up a limited company, summing that your broker will open a limited co. account
Pay your self a salary of £4500 p.a..You do not have to pay class 1 NIC, Class 2 NIC, Class 4 NIC or any NIC, BUT still retain your rights to state pension/benefits. But surely you won't need any.
Take a dividend upto a maximum of £24000 and do not pay any tax on these dividends.
Assuming your profits are more than £50000p.a. but less than £350K p.a you will only pay 19% corporation tax.
If you need more than £30,000 pa to live on or for one-off expenses all you will pay on the dividends is 25% tax.
Frugi you are on to a winner. Go talk to a good accountant.
Good luck (by the sounds of it you don't need any) in your trading.
ps-with all those savings setup a trust (in the UK I hasten to add) and live a life of riley. A good IFA/ Solictor/ Accountant will advise you on the trust.
pps- make your wife a shareholder -take proper advise and double your tax savings
get the spouse to finance IT equipment, data feed software, traning (but you don' t need any?) , research, bookkeeping you get the picture and her shareholdings amy just be acceptable to HMIT.
ppps- ask you accountant for advise on gifting shares in your company to your children.
Oh boy, you have landed on your feet
Salty Gibbon
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Gullible
Could you possibly expand on this ?
Hi Salty,
Sure, Class 2 NIC is paid by sole traders and partners and is not applicable to employees.
Class 1 is paid by employees, but Mr Brown has said and legislated that weekly salary upto £97 ( u might like to check precise figure with your accountant) no Class1 Nic is payable, but the employee will still accrue state benefits.
Class 2 as above but employe'r contribution.
Class 4 is paid by sole traders and partners and is not applicable to employees.
The above planning points will work only for bonafide companies and not employees in disguise. In fugi's case he has already been 'grante' sole trader statuts by HMIT and he can convert the status to a ltd.
Care needs to be taken re paper work for the scenarios to work properly.
As always please consult a good tax accountant before emabrking on what is said on this board.
Personally, I would give an arm and a leg to be profitable trader and not worry about tax. T
Sure, Class 2 NIC is paid by sole traders and partners and is not applicable to employees.
Class 1 is paid by employees, but Mr Brown has said and legislated that weekly salary upto £97 ( u might like to check precise figure with your accountant) no Class1 Nic is payable, but the employee will still accrue state benefits.
Class 2 as above but employe'r contribution.
Class 4 is paid by sole traders and partners and is not applicable to employees.
The above planning points will work only for bonafide companies and not employees in disguise. In fugi's case he has already been 'grante' sole trader statuts by HMIT and he can convert the status to a ltd.
Care needs to be taken re paper work for the scenarios to work properly.
As always please consult a good tax accountant before emabrking on what is said on this board.
Personally, I would give an arm and a leg to be profitable trader and not worry about tax. T
trendie
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what about training courses ?
can you write off the cost of training courses against your trading profits ?
what about trading losses from a couple of years ago ?
can these be offset against recent trading profits ?
( if these losses are SB losses ? )
can you write off the cost of training courses against your trading profits ?
what about trading losses from a couple of years ago ?
can these be offset against recent trading profits ?
( if these losses are SB losses ? )
Hello Trendie,
I beleive once you have been 'registered' as a sole trader any training courses can be written off against your trading profits as long as the training helps you do your tarding better. Training courses attended before trade commences can be a problem.
Trading losses can be carried forward to future years and can be set-off against profits of the same trade in future years.
SB losses/profits, I beleive are 'gambling' profits and losses and therefore not subject to tax, SB losses therefore can never be set-off against any profits from say CFD/ futures trading.
As always seek proper professional help and do not rely on anything you read on this or any other boards.
Trust this helps.
G
I beleive once you have been 'registered' as a sole trader any training courses can be written off against your trading profits as long as the training helps you do your tarding better. Training courses attended before trade commences can be a problem.
Trading losses can be carried forward to future years and can be set-off against profits of the same trade in future years.
SB losses/profits, I beleive are 'gambling' profits and losses and therefore not subject to tax, SB losses therefore can never be set-off against any profits from say CFD/ futures trading.
As always seek proper professional help and do not rely on anything you read on this or any other boards.
Trust this helps.
G
FetteredChinos
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gullible said:
FWIW, as my tax knowledge is a little rusty, but i recall there being a discussion paper suggesting that they are going to remove this little loophole and treat the dividends as a salary.
I can dig up the relevant references, but i recall this being the case. Im a management accountant, rather than a tax accountant, but i do recall this suggestion from my readings.
someone ACA qualified might be able to clarify the latest position.
FC
Hi!
I am a sole trader although it's taken me six years to figure out you can restrict your income tax by offsetting your losses against tax and also you can offset your expenses ie. Computer, software, stockbroker fees, paperwork, attending convensions etc. plus if you have an accountant you can even offset his cost's against tax, a good accountant is a must if you are to trade at a profit and not a loss.
your sincerely
Paul S-A
Good Trading
I am a sole trader although it's taken me six years to figure out you can restrict your income tax by offsetting your losses against tax and also you can offset your expenses ie. Computer, software, stockbroker fees, paperwork,
attending convensions etc. plus if you have an accountant you can even offset his cost's against tax, a good accountant is a must if you are to trade at a profit and not a loss.your sincerely
Paul S-A
Good Trading
frugi
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Interesting that the majority seem to favour the use of an accountant. Granted, no man is an island, but I still prefer to buy a couple of tax books and work these things out for myself at considerably less cost as I believe that I can save myself more tax than an accountant could, especially when his/her fees are,um, accounted for.
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