Sole Trader status

[gullible]

Frugi,

I belive that you may not be quite right on this occassion. A good accountant is worth is weight in gold. Conevtrate on your trading and appoint somebody else to keep you on the straight and narrow and save you tax wherever possible.

But I agree, each to his own

 

[frugi]

Sorry - I didn't mean to give the impression I was dissing accountants and I'm all for taking advantage of highly specialised knowledge in return for money , but on this occasion, having wormed through a book or two, my tax situation actually looks quite simple.

However it would have been a lot more difficult to work all this out if I hadn't been privy to some of the excellent ideas presented by others on this thread, you very much included, for which many thanks.

 

[newstart]

Hi Frugi,
no disrespect but I ain't got time to slave over books I need to trade2win and win2trade.


Paul S-A

 

[frugi]

Try moving up a few time frames - you'll find there's loads more time to chill when you're trading off a one minute chart :cheesy: (with apologies to Salty)

I'll get me coat...

 

[gullible]

Sorry - I didn't mean to give the impression I was dissing accountants and I'm all for taking advantage of highly specialised knowledge in return for money , but on this occasion, having wormed through a book or two, my tax situation actually looks quite simple.

However it would have been a lot more difficult to work all this out if I hadn't been privy to some of the excellent ideas presented by others on this thread, you very much included, for which many thanks.

Hi Frugi,

I did not think you were dissing accountants- although I would not balme you if you did.

You are quite right this site is very informative. I myslef have learnt quite a lot from the site.


Gull

 

[monktrader]

very interesting discussion

I went to an IR office in Central London when I was staying in London last year ( I am not British), lived and traded there for a few months) I said I wasn't doing anything but trading and they told me I wouldn't have to pay NI, nothing of the sort and still qualified for NHS, I would only have to pay anything above the allowance ( of 7000 pounds if I recall) I thought that was great but they were wrong obviously . Now I also assumed I could deduct losses, but that is not correct either, is it ? Good thing I didn't stay long enough to pay taxes, well anyway I really didn't make much during that period .

 

[donaldduke]

One of my IB accounts is in the name of a Ltd company. If you think that it is a hassle providing all the documentation/validations for a personal account, then just triple it. That's because you have to provide all that documentation for the company itself to prove it is an active and legal entity in its country of incorporation, then all that documentation for the director(s), and then all the documentation for each of the people who will be trading the corporate account. And copies of board resolutions authorising the trader to trade the corporate account, etc. So three times the work, basically, but remember that this is not an IB requirement, but federal government requirements following Sept 11 and money laundering issues. So it doesn't matter whether you are using PFG or IB or any other broker - same requirements.

And then of course at the end of the year you have all the fun and frolics of corporation tax.

It seems that Skimbleshanks is no longer posting on Trade2Win??.
I wanted to ask him about the forming a limted company and trading with IB.

I plan to trade through a limited company and wanted to know if a bog standard off the shelf
newly formed company would do or if the company had to have some sort of trading
history.

Anyway i have mailed IB. But if anyone has any more info/experience please post.

 

[frugi]

As I've just completed my first ever self-assessment form I thought I'd offer an obvious little tip or two for those that trade through Interactive Brokers and are mad enough to fill in their own forms. Though actually they're probably easier to fill in than they are for most conventional business as there is no stock, turnover, sales, payments due in the future etc. - just a simple monthly p/l - and the expenses are few: data feeds, commissions & software were all I claimed for.

Make your accounting date 31st March, i.e a year is 1/4 to 31/3, and then you can get all the info off the IB monthly statements really easily and print out a the first couple of pages of each in case Hector is suspicious. This avoids faffing around with basis period adjustments and other arcane rules, even in the first two years of business.

Don't forget to list the interest payments separately and deduct them from trading profit.

Oh, and to save on Tippex, read the elfin notes - even when the question seems obvious - like I didn't.

 

[roguetrader]

LOL frugi, do you not claim your internet connection as well?

 

[frugi]

That's already paid for by my p/t employer so it would be a bit cheeky. I really, really do not wish to upset Hector at this juncture in my career

 

[Salty Gibbon]

Could someone please explain to me what is the benefit of paying National Insurance contributions as a self employed person ?

 

[frugi]

1. You will not be incarcerated for tax evasion
2. Class 2 ones, and maybe Class 4 (not sure) contribute towards your state pension, magnanimous as it doubtless will be.
3. That warm, fuzzy feeling you invariably get after contributing to our devastatingly efficient public services.

 

[Salty Gibbon]

What has not paying NIC got to do with tax evasion ?

I thought that it is not compulsory.

And the State Pension can hardly be regarded as a benefit.

 

[Salty Gibbon]

That warm, fuzzy feeling you invariably get after contributing to our devastatingly efficient public services

Not !!!

 

[frugi]

If you earn more than about 4.3k a year as a self-employed gibbon you have to pay Class 2 NI flat rate of just over £2 a week and also Class 4 NI on 8% of profits between c5k and 32k and 1% above 32k. Stealthily does it, Gordon.

You also keep your CGT allowance meaning you can make tax free profits of around 13k a year, which is a wee bonus of being self-emp and takes some of the sting out of all these squandered taxes.

The State Pension is rather small but better than a slap round the chops with a halibut, I would venture.

 

[roguetrader]

2. Class 2 ones, and maybe Class 4 (not sure) contribute towards your state pension, magnanimous as it doubtless will be.

ROFL, unless you are about 50+ now, by the time you get there the government will be "Pensions? Oh no sir we don't do those any more. All spent sir.

 

[frugi]

Don't you worry Roguetrader - the burgeoning Hand Car Wash empire will doubtless provide the required amount of [imported] young people's NI contributions to fund our expensive retirements. Actually that's not funny, but the whole ageing population argument seems to ignore the fact that severely less well-off people abroad may actually wish to work here and with luck some will slip through the Daily Mail's flag-waving net. Luck depending on your point of view, of course.

Or, tighten up immigration, ensure lots of pensionless silver surfers do die of cold and starvation and the population declines substantially, which could be a benefit "to the country" in the long term. Halve it and we can feed ourselves, for instance; the roads would be more pleasant to travel on and I bet civil unrest would decline. To cease hurling money at the indigenous population as an incentive to have kids would also help achieve this aim.

Cue immigration spat and accusations of heartlessness, oops, unintended consequences, that's Greenspan's department so I'll shut it.

 

[JP1966]

[QUOTE=frugiYou also keep your CGT allowance meaning you can make tax free profits of around 13k a year, which is a wee bonus of being self-emp and takes some of the sting out of all these squandered taxes.


You have to be really careful on this bit. If the revenue decide you are trading full time (or even more actively than is the norm) then they can designate you as a trader and you lose the CGT allowance as your revenue is deemed to be income and not from investment gains

 

[frugi]

JP,

If you have a principal trading account with which bread and butter is earned daily - as your job - through several daily intraday futures trades, for instance, and then elsewhere and clearly separated you have a sedate ordinary brokerage account, within which "investments", as in buy and hope, are conducted, is there no chance that they would accept that one was your job, subject to income tax, and the other was ordinary private investment, subject to CGT? Could I have used more commas in the preceding? Anyway, extreme care, as you say, is paramount and possibly the key if they are to accept that there is an honest difference between the activities. I'm not risking it this year, that's for sure.

If not I guess it has to be ISAs only. They can't remove the tax-free status of them for full-time traders, surely? Well, they can do what they like, but there'd be an outcry.

 

[JP1966]

I am no tax expert (or even amateur) but rely on my accountant! As I trade fx through my company but only use the CGT allowance for share transactions then my accountant hopes that this will suffice as I probably only do 20 or so equity transactions a year.