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HELP! UK tax basics

Discussion in 'Beginners Bootcamp' started by deluder, Nov 25, 2008.

  1. Bowmaker

    Bowmaker Private, 1st Class

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    Everyone seems to get a different answer to this question, even from the IR. I am a member of a trading room and the organiser assures me that in the Uk gains made on Forex are classed as Capital gains tax. I have checked this out and got it verified today by the Inland Revenue. I spoke to a guy on the phone who was pretty clued in to it. He puts it like this. If you do this full time for a living you are not an employee, neither are you self-employed. You are in effect a speculator(not a gambler). You are speculating on changes of currency rates. You have no employees, customers etc. This therefore makes you liable for capital gains tax. There is an exemption on £10100 before tax is due. So if you put £10000 into a broker you would be allowed to withdraw your initial investment plus the exemption amount before tax would be due. In this case then you would only have to pay tax on profit over £20100. The rate of tax would be 18%. This is a fixed figure for any amount from £1 - £1000000. You would fill in a tax return form at the end of the tax year detailing amount invested originally, total profit,total loss and final balance. You would not need to provide every single winning/losing trade information. You would also be liable to upkeep your National Insurance, assuming you were not working full time. I believe that would be at self employed rates but not too sure on that
     
  2. cowmadagan

    cowmadagan Sergeant

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    To my knowledge, as long as you don't withdraw your profits, it's like they don't exist.
    Ethically, that's the way it should be as they can disappear as fast as they've come. The fact is that they don't leave a paper trail until they've been withdrawn.

    I sure hope that this is true for when my butler pulls out my 1 million pounds of profit...

    hmmm....

    I'm going to go hang myself...
     
  3. rpaco

    rpaco Sergeant

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    If you do the same but spreadbet instead of trading, on a UK based platform like Capital spreads then it is gambling. £1 per pip which is a lot higher than some trade on, but then the capital required is £60 per £ betted on cable and less on some other pairs.
     
  4. Bowmaker

    Bowmaker Private, 1st Class

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    Cowmadagen. i think you may be right. i knew there was a question I needed to ask and that was it. Do you pay tax on profits still in the account or only when you withdraw. I'll try and get clarification on that. Couple of other minor things though. As you are not in business as such you cannot claim any kind of additional tax relief the way you would if you were in business. i asked about things like the tools of the trade for example. Costs of PC, internet connection, running costs, mobile phone connection etc. None of these can be claimed for as you are not in business. Another thing is that all these rules etc mentioned in this and my last post are only valid if you trade for yourself. If you trade an account for someone else using their money then you have a business and then declare for income tax but you would then also be able to claim expenses.
     
  5. Bowmaker

    Bowmaker Private, 1st Class

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    Further to my previous posts I have got more clarification on whether you are liable to pay capital gains tax whilst any profit is still in brokers account. The answer to this is YES. You are liable for capital gains tax on profits still in the brokers account and not withdrawn subject of course to the exemption of £10100 plus the amount you initially invested. This is worked out on a yearly basis. You need to fill in a tax form at end of tax year(5thApril) declaring how much invested, total losses, total profits, year end balance. Further information regarding this can be got from

    Sian Moses
    Capital Gains Technical Unit
    HMRC
    TY Glas Road
    Cardiff
    CF14 5PF
     
  6. rpaco

    rpaco Sergeant

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    That sounds extremely harsh, because you could well loose that profit again before you ever got chance to withdraw it. Still if it is a flash evaluation on the 4th April and you can roll the loss into next tax year it wll be reasonable. Better that income tax anyway IF, it remains at 18% for CG.
     
  7. ukfxtrader

    ukfxtrader Recruit

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    This is a part of an e-mail that I have received earlier today.
    25/04/2012

    "Kind regards,

    Alpari (UK)

    *Any profits you make from spread betting are completely free of capital gains tax, stamp duty and income tax (for UK residents). UK tax laws are subject to change and individual circumstances may vary. Financial spread betting is only available in the UK."
     
  8. Black Bird

    Black Bird Corporal

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    "On the subject of forex trading, spread betting firms' spreads are very similar to retail forex brokers. That's right. The costs are the same. The difference is whether you get taxed on it which can really make a substantial difference. Makes the decision a no-brainer for anyone other than a consistent loser not troubled by annual profits.

    (i) no UK resident has ever yet been assessed for income tax or any other form of tax on any spreadbetting profits.

    (ii) the Inland Revenue has never announced, indicated or threatened any action or intention to try to tax any UK resident in any way on any profits resulting from spreadbetting."


    Source: Comparing Spread Betting to Forex Trading
     

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