Offsetting Losses

[davidc123]

Hi,

Firstly, I apologise for having to ask such a stupid question. I've read a lot of information on how losses can be offset against profits for tax purposes, but I can't find any real explanation or definition of what exactly this means?

I suspect it is probably the answer to my main question - if I make £100 on a trade and then lose £100 on another, do I still have to pay tax on the first profit? Would offsetting the loss mean that I have an overall profit of £0 and therefore pay no tax?

Thanks.

 

[Steve2004]

That is correct, all of your losses will reduce your profits over the year and therefore you will pay tax on the difference. If more losses are made than gains then this loss can be carried back or forward (subject to certain criteria) to other years.

 

[davidc123]

thanks for the clarification

 

[maxima]

sorry to interrupt, but I need to write down my previous year loss in my tax return form.

My accountant said that you can offset future gains against losses made in previous years. However you need to record this in the tax return form.

The problem is that the accountant wants all the transactions (which involves a lot of work and also all of them are in USD). I think he is just trying to get paid better.

I tried to give him difference between what I paid in GBP and what I withdrew. Considering that the account is closed - that should be the loss without going into details...

Could anyone please tell if I can just record the loss and if HMRC asks the details I'll show the statements?

Also how is it difficult to write this figure in the tax return for future references? Is there a cell in the form to fill or do you have to write detailed explanation with all the transactions attached to the form ??

 

[Steve2004]

Your accountant should be there to advise you, not tell you what to do. If you are happy with recording the loss as you have calculated it then you should request they include that loss on the return. The return is signed by you and they are not responsible should the Revenue enquire into it.

 

[Technically Fundamental]

sorry to interrupt, but I need to write down my previous year loss in my tax return form.

My accountant said that you can offset future gains against losses made in previous years. However you need to record this in the tax return form.

The problem is that the accountant wants all the transactions (which involves a lot of work and also all of them are in USD). I think he is just trying to get paid better.

I tried to give him difference between what I paid in GBP and what I withdrew. Considering that the account is closed - that should be the loss without going into details...

Could anyone please tell if I can just record the loss and if HMRC asks the details I'll show the statements?

Also how is it difficult to write this figure in the tax return for future references? Is there a cell in the form to fill or do you have to write detailed explanation with all the transactions attached to the form ??

What are you trading? CFD?

 

[maxima]

US futures

 

[Technically Fundamental]

Yeh but are you actually buying the futures contract or buying the right to buy the futures contract

 

[maxima]

that would be options wouldnt it?

futures

 

[Technically Fundamental]

Your transaction statement should suffice. Just print off the dates 6th April right through to 5th April. Make sure you also print off some sort of legend to prove codes of the instruments you're trading.

As far as the confusion before I just wanted to make sure you were actually buying the futures contract rather than some sort of crazy instrument like CFDs or something else. I'm not familiar with american trading platforms.

It's all going to be Capital Gains Tax if it's futures. Losses will be offset against gains before your liability will be calculated.

 

[maxima]

I am buying and selling them on CME. straight. This is not a bucket shop if that what you are asking. I am in England. I trade americans because I am plane lazy and wake up at 11am.

BTW. Situation with the tax return has resolved. Thanks for those tried to help...

 

[thegangstareturns]

If you make £100 on futures trading then hedge your trade using a spreadbet. The futures trades goes to zero and the spreadbet goes to 100. Do you pay taxes at the end of the year?

 

[donaldduke]

If you make £100 on futures trading then hedge your trade using a spreadbet. The futures trades goes to zero and the spreadbet goes to 100. Do you pay taxes at the end of the year?

No. You shouldnt. Although the HMRC might try it on.

Because the hedge could easily go against you just as much as in your favour and you end up losing 100 in SB account and only making 80 in the futures account (after tax).

And if you are really sure its going to go in your favour, then why bother hedging? Just do it outright in your SB account.

 

[Technically Fundamental]

If you make £100 on futures trading then hedge your trade using a spreadbet. The futures trades goes to zero and the spreadbet goes to 100. Do you pay taxes at the end of the year?

That's a nice little loophole I've never even considered that.

If you're in a losing trade DMA you could, depending on your risk man and strat, offset by going in opp direction in a larger size in a spread bet and gain a tax free profit and a nice tax allowable loss to offset aginst other DMA income. Sex!

 

[donaldduke]

That's a nice little loophole I've never even considered that.

If you're in a losing trade DMA you could, depending on your risk man and strat, offset by going in opp direction in a larger size in a spread bet and gain a tax free profit and a nice tax allowable loss to offset aginst other DMA income. Sex!

If u think about it youll find that in the long run this strat doesnt work, has zero expectation, probably even negative given transaction costs.

 

[Technically Fundamental]

Probably. But every now and again