Self assessment - Tax return

[TheGoodGoodMan]

Hi, I know that it's probably somewhere on this forum but so far i have no luck finding it, so i will ask anyway.
I am filling an online self assessment form (UK) and i had a losses last year trading US stocks that i need to show. Where should I put it? I cant find appropriate field for this. I know that it's nothing new for seasoned traders.
Detailed information will be appreciated.
Thank You.

 

[random12345]

Hi, I know that it's probably somewhere on this forum but so far i have no luck finding it, so i will ask anyway.
I am filling an online self assessment form (UK) and i had a losses last year trading US stocks that i need to show. Where should I put it? I cant find appropriate field for this. I know that it's nothing new for seasoned traders.
Detailed information will be appreciated.
Thank You.

They should go on your SA108 - the SA106 is only required if you paid foreign tax on any gains.

I would advise getting a proper tax return software package to do this for you as you are supposed to file a schedule of capital disposals with the Revenue showing proceeds and cost for each disposal.

Taxcalc (Individuals package) is an excellent piece of software for a beginner and very fairly priced. I have no business relationship with them whatsoever.

 

[TheGoodGoodMan]

They should go on your SA108 - the SA106 is only required if you paid foreign tax on any gains.

I would advise getting a proper tax return software package to do this for you as you are supposed to file a schedule of capital disposals with the Revenue showing proceeds and cost for each disposal.

Taxcalc (Individuals package) is an excellent piece of software for a beginner and very fairly priced. I have no business relationship with them whatsoever.

Day trading is not under Capital Gains Tax, it's Income Tax so the form SA108 is not good for me, i think.

 

[random12345]

Day trading is not under Capital Gains Tax, it's Income Tax so the form SA108 is not good for me, i think.

I see, well your original post simply claimed you had losses trading US stocks, which would generally fall under CGT unless you are shown to be actively engaged in a trade via the badges of trade tests and test cases etc. For example a dentist who traded hundreds of times a year plus was disallowed from claiming losses via the self employment pages despite basically being what you would call a day trader despite having other gainful employment. I won't get into the precedents re trading classification as they are long and painful.

However, if you're certain you're self employed and have already registered with HMRC as such then you should use the sa103 pages, either full or short depending on your circumstances. Again you should use a decent piece of software to do this properly.

Note that if you take a loss and this causes a refund against PAYE you may have paid in some other position then expect to be challenged.

 

[TheGoodGoodMan]

So is it self employment? I am not registered as a self employed. I thought that it will be somewhere in foreign income..

 

[random12345]

So is it self employment? I am not registered as a self employed. I thought that it will be somewhere in foreign income..

If you're saying you're a day trader and that you think/are sure your income is outside the scope of capital gains tax, then you're saying you're self employed. Categorised either as self employment or CG then the income belongs to the UK per the double tax treaty, except you don't have any income, only a loss, so you have even less to worry about and have no requirement for the foreign pages. If the US withheld any tax from you for whatever reason (i.e. no W-8BEN was filed) then you need to claim that back through the US tax system.

If you already have a UTR then it probably won't matter that you didn't register as Self Employed.

As I've said though, if you're going to file a tax return with a loss in the SE pages and end up with a refund of PAYE then prepare to get a section 9a enquiry.

 

[TheGoodGoodMan]

Ok, that seams right. Thanks a lot random12345.

 

[Trader333]

In my view it may make more sense to declare capital losses in this case as they can be offset in the future against any capital gains which is not the case if you are trying to declare it as some kind of cost of doing business as( in your case) you are not self employed.

 

[TheGoodGoodMan]

In my view it may make more sense to declare capital losses in this case as they can be offset in the future against any capital gains which is not the case if you are trying to declare it as some kind of cost of doing business as( in your case) you are not self employed.

So, if you are day trading and have a profits for a year to declare in which section you do this? As a Capital Gain or Income Tax? Plus how it looks like if you are trading for a prop firm?

 

[Trader333]

I would declare it in capital gains for the case you have given.

 

[random12345]

So, if you are day trading and have a profits for a year to declare in which section you do this? As a Capital Gain or Income Tax? Plus how it looks like if you are trading for a prop firm?

Were you trading the underlying US stocks in full?

There's two ways to look at this. If you paid tax on something else in the year, then it is beneficial to you to declare the loss through your self employment pages since you can offset the losses against general income, known as loss relief. However as I touched upon, you need to be sure you qualify as trading on a commercial basis throughout the year with respect to test cases of the same nature.

However as T333 says generally you'd want them categorised as CGT since you can carry-forward the losses indefinitely. Considering you seem to be buying and selling actual shares then you have a strong case for CGT. You could easily argue you were not trading on commercial terms because you did not make a profit. HOWEVER, you do need to consider how future years will look. If you do end up properly trading in future years then these CG losses won't be much good to you except when you deal with property outside of trading.

Prop traders are almost always self employed.

 

[TheGoodGoodMan]

Thank you, it is very helpful.

 

[TheGoodGoodMan]

So, just to clear things up.. if i will be trading for a prop firm (using my money but from their account to go around $25k day trading minimum), my profits and losses will go under income tax or capital gain?

 

[random12345]

So, just to clear things up.. if i will be trading for a prop firm (using my money but from their account to go around $25k day trading minimum), my profits and losses will go under income tax or capital gain?

Probably IT unless you have a good argument for CGT (such as the badges of trade issue).

Note that the costs of trading for a prop firm are significant so IT probably won't be that bad because of the number of allocable costs you'll have.

Even trading from home can have a lot of worthwhile expenses - namely a use of home allocation.