day trading and capital gains/losses

lm50

Newbie
2 0
Am familiar with long term trading in shares and how to report capital gains/losses to Inland Revenue.
Have recently started day trading CFDs. I had some gains and some losses and this has got me thinking. Sometimes do 10 trades a day and if I continue at this rate for a year, it would be extremely tedious to report each individual trade which could amount to hundreds of trades to the Inland Revenue for Capital Gains purposes.

How do others cope. Haven't been able to find any information on this.
 

Splurge

Member
88 3
Does your broker not supply end of day/month statements?

The IR are not interested in detail although they can ask for it. Profit and Loss at the end of the month should provide the answers and this should be available/supplied each month by your broker plus commissions etc
 

sidinuk

Established member
624 5
If you deal that often (up to 10 times a day) the revenue will almost certainly take the view that you are trading and therefore subject to Income tax on your profits rather than captial gains tax. Basically you then just need to enter 3 lines on your tax return, trading profits, expenses and net profit. You will be able to claim resonable expenses in running your trading business (computers, internet costs etc. as well as a cost for using part of your home as an office). The downside is that you will lose the annual CGT exemption.

You need to speak to an accountant who has experience of dealing with traders. There are considerable tax advantages to trading through a Ltd company even if you are not making that much profit. The first 10k of net profit is now taxed at 0%.
 

sidinuk

Established member
624 5
You are right it is very complicated with a lot of different options available all depending on an individuals personal circumstances, which is why I recommend speaking to a tax accountant with experience of trading. It may be in the traders interest to set up as a trader, rather than just reporting CG's.
 

Splurge

Member
88 3
I have sought professional advice on this matter...

Basically, if you trade cfds for a living - i.e. your income is derived from your trading you would be best advised to operate as a limited company owing to the tax advantages available to do so. Its a pain getting it there but it is better in the long run. This is especially true if you also s/b as the tax man will not differentiate between trading using cfds or sb if the account is in the same name or potentially direct family member and will tax you on your s/b earnings as well. It is therefore advisable to trade s/b under your own name.

If you trade and have other income then it becomes very grey as each case will be treated on its own merits (how much you earn paye compared to how much you earn trading).

hope this helps
 

X-Ray Specs

Junior member
29 0
The LTD company status I have heard will be changing soon.
The rumours that the beloved Chancellor is seriously thinking about making dividends subject to NI contributions.

This will negate somewhat the benefit of trading through a limited company.
 

Skimbleshanks

1
2,325 16
Let's hope he remembers to incorporate some threshold before NI on divvies is due, otherwise every Tom, Dick & Harry who receives a 50p divi from their shareholdings will be liable to pay NI.
 

Dr Mike

Member
92 1
And I hope you've managed to fill in the 48 questions on the new Children's Tax Credit thingie correctly.

The way things are going I may find it more profitable to reduce my trading and increase my part-time accounting/tax practice.

Unlikely to have the same effect on the adrenalin though.
 

Trader333

Moderator
8,608 936
Tax on Trading

The simplest, and cheapest, way to determine the tax situation with regard to any form of trading is to phone the tax office and ask. They are very good at telling you the situation and you dont have to give specific details either.
 

sidinuk

Established member
624 5
That's right the tax office will tell you the tax situation in any given situation, but they won't necessarily tell you the most tax efficient way to organise your affairs. That's what you need a friendly tax accountant for!
 

Skimbleshanks

1
2,325 16
... and if the information you submit is incorrect based on a telephone call, they will deny that their staff told you otherwise! And don't think you can get it in writing either.

By all means ask the tax office, but do make sure you ask more than one just to make sure. :D
 

lm50

Newbie
2 0
Thanks guys for the above information. Seems I need to think hard about getting myself an accountant. I dont have any other income and need to be certain that I can make enough to pay for the accountant and also need to think about being a trader/Ltd Co. etc. (guess I am more clueless than I thought!). Are there any books that would help me decide the route I should take?
Anyway thanks again - most useful.
 

Splurge

Member
88 3
X-Ray Specs

Yes the days of drawing no salary and then paying yourself a massive divi at the end of the year are nearly all but over. Trust these IT specialists to milk it so much it catches the attention of our friendly taxman.

However if the chancellor in his wisdom makes it more beneficial for people to trade as individuals rather than as a company then people could use the company status in a capacity to cover operating costs only. I dont think this will happen somehow. I would expect that as long as you are drawing a sensible salary from it (and then taking a nice divi at the end of the year) there would not be an issue. But who can second guess what the ol' plonker will do next!!

There are some obvious and not so obvious advantages to operating within the confines of company status and I for one would be very surprised if it becomes more profitable for people to run their business as sole traders than as limited companies no matter what profession you are in. I understood that the reason for making the first 10k tax free was one incentive to encourage companies to become limited in the first place.

It remains logical to me therefore that although the belt may be tightened on the divi situation, a complete strangulation of it is doubtful and incentives to trade as a 'Derek Trotter' are unlikely.

Don't get me wrong, it is each to his own.

I am not a tax expert, and will always expect the rules to change.
 

Splurge

Member
88 3
btw Trader 333

The last time I spoke to the tax office I think his name was Homer Simpson as most answers were 'doh'.
 
 
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