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  • Uk and tax implications

    Hi,

    this is a reach out to any uk citizens who are using this site and hopefully have some experience with withdraws and tax implications, i dont want a precise answer as hell even HMRC struggle with that,

    Quick explanation,

    i started forex 4 years ago and i phoned the uk tax man before i started, after lots of taps an the involvement of the operators manager they finally agreed that, "as i was in full time employment, but trading as a hobby then tax came under capital gains"

    great i thought an off i went, 4 years of learning and losses generally im now questioning the same issue, this time round the key difference is hopefully with the expert help of not only the traders but the community ill be faced with sizable gains, and thus be liable to pay tax on withdraws as im in full time work and pay income tax at 40%,

    digging on goggle shows alot of old information and conflicting views, only 2 sites or so recent but again not clear in respect to where the line is drawn between a hobby an a business, is this area really that grey?

    how do others deal with this, i never claimed relief on my losses so im guessing my first step is a self assessment form when the time comes?

    many thanks to anyone who can help

    //Ben

    [edit] this might sound crazy but can you open forex accounts for minors? like for my son? yes im really thinking of putting his capital into forex an hopefully grow
    Last edited by dupapa; 06-07-2014, 01:45 AM.
    http://www.myfxbook.com/members/dupapa

  • #2
    It's the same if you were USA Citizen........ I questioned the same thing. Funny though Capital Gains isn't the real definition for what we do in Forex.... These are actually Contract for the difference. Another thing is to make it easier on you when it comes tax time is that you start a business with the proper papers..... Then you write off the location at which you make your trades from... Which can include Electric bill, house rent, Other things of that nature. Start up costs you can usually write off on taxes but I'm referring to US TAX Ways I know nothing about the UK... But I would assume we copied the UK papers and put our label on it... so if you start a trading account with 10,000 GBP according to US tax laws you can write that off as start up costs. Let's get real 99% lose that much in a year or even a month. Even if you were profitable never lost a month of winning trades. Consider that money GONE Lost. Now if you double the account and pull out your initial investment of 10,000. You neither lost or gained anything IF it's within the 1st year of the initial account deposit. Now you can let the business just grow using the signals or your trades and pull almost 100% of profits.
    ..
    Withdrawals I can say you need to hold back the proper % of the $ amount that you withdrew from the account to pay for taxes the rest is your money to play with... Give the Governments what they want. They don't care what you do with the rest. example you pull out 2000 GBP take your 40% tax bracket out of that 2000 and what that number is you set it to the side in a safe labeled taxes. The rest left over is yours.... They get their 40% you get 60% but really if you add in the fees of signals you lost another 5-10% just giving them the fees on Mams or paying for the signal your self.
    ..
    Good luck
    Last edited by EricB; 06-07-2014, 02:57 AM.
    DETACH YOUR MT4 CHARTS Now Available. - Trading as a hobby is realistic.

    Comment


    • #3
      Originally posted by dupapa View Post
      [edit] this might sound crazy but can you open forex accounts for minors? like for my son? yes im really thinking of putting his capital into forex an hopefully grow
      I would not recommend this, as you know Forex are an inherently risky investment. If you're saving long-term for your son's future I would recommend safer investments like low-risk ETFs or government bonds. But those are just my 2 cents.

      Comment


      • #4
        Hey Ben,

        I'm a UK citizen and have been into this in some detail.

        All forex earnings in the UK are treated as capital gains.

        The only way around this is to open a spread betting account with one of the UK brokers who offer this option (depending on account size, this includes FXCM, Alpari, GKFX, ActivTrades and one or two others) on MT4.

        Your winnings/earnings are then treated as the proceeds of gambling and are as such not taxed. You cannot open accounts for minors, so that possibility is a non-starter. Obviously, if you lose money on a SpreadBet account, your losses are not tax-deductable.

        The grey area with SpreadBetting occurs when the individual has no other source of income. In such cases, HMRC may contend that as a sole source of income, the winnings are indeed tax-deductable. There was a test case a few years ago in which a full time gambler was taken to court by the HMRC on the grounds that he should pay taxes. In the event, the HMRC lost the case and may feel their fingers sufficiently burned not to try this again. Therefore, even if you do not have another source of income, SpreadBetting is probably still a secure, non-taxable option.

        Talking to individual tax-offices is often unhelpful, as the advisors are often unaware of the law, which as you have already pointed out is vague at best.

        The problem with SpreadBetting accounts is that the bid/offer spread tends to be wider than on some other accounts, and some of the SB brokers are bucket shops. I'll be happy to advise you on that if you are interested.

        If you have been trading forex for four years on a non-SB platform, you need to look at your capital gain from this source for each of those April-April periods. Should the profit be above the threshold during any one of those periods then capital gains will be payable. Tax is charged irrespective of whether you have withdrawn from your broker.

        Best regards,

        Roger

        Comment


        • #5
          Hey Roger, that was great advice thanks for sharing. Do you think the signals here will work on a spreadbetting account? Lots Vs points.

          Scott

          Comment


          • #6
            Hey Scott.

            You can work out a formula for converting lots to points, that's for sure, and I did it in the early days. To follow the traders on here, you need to convert initially to GBP (using the master's currency as your numerator) and then convert that to whatever GBP point value your broker uses. I have done this in the past and you need to use what look initially like crazy multipliers in order to get one to one risk.

            However, it is eminently doable.

            Your other option is to use FXCM. Even on Spread Bet accounts, they use lots, rather than points, and so the whole process is massively simplified. In truth, for larger accounts, I wouldn't use any of the other UK Spread Bet brokers anyway, apart from Alpari, as the alternatives I mentioned above are effectively bucket shops.

            All the traders on here will work with a Spread Bet account with the exception of Viper, and I speak from experience, having tried to use him twice and failed, both on Alpari and FXCM.

            Regards,

            Roger

            Comment


            • #7
              I'm in the UK and have been considering setting up a limited company and have everything move through there. This way you could pay yourself dividends and be taxed less. Capital gains after the tax free allowance are charged at 18-28%.

              Comment


              • #8
                I was just about to comment on that. I have a limited company (not for trading) and pay company tax on profits but I get 30k tax free from dividends plus the usual tax free allowance. Add a spouse/ partner to the mix as a director and paying tax is kept on the low side.

                Comment


                • #9
                  Plus there are other benefits I have with a limited company that is offset against the company tax like leased car, vat, petrol usage, stationary, IT equipment.

                  Comment


                  • #10
                    Originally posted by ScottFX View Post
                    Plus there are other benefits I have with a limited company that is offset against the company tax like leased car, vat, petrol usage, stationary, IT equipment.
                    This was my thought exactly, you could do things like claim the tax back on the VPS, Signal services, swap fees, you could rent one room in your house to your business and claim tax relief on part of your mortgage, phone line, computer, the list goes on.

                    Comment


                    • #11
                      Yes, I have been amazed at how low my overall tax has been with my limited company thanks to my accountant. I wouldn't do it without an accountant. I just haven't looked into trading through a Ltd company yet. I have insurance through PCG (Google will take you to their site) for possible HMRC investigations. Insurance covers investigations plus court costs.

                      Comment


                      • #12
                        Hey Guys,

                        While I can't offer any input on the UK tax system, I can say that this is a very welcome thread.

                        If people are worried about tax it shows that there is some decent money being made by you guys.

                        And that is great news
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                        • #13
                          Can anyone comment on tax treatment of forex in Australia and/or Hong Kong?

                          Comment


                          • #14
                            From what I can tell in Australia, you have to declare it as income. No other clever ways around it

                            Sent from my Nexus 5 using Tapatalk

                            Comment


                            • #15
                              Originally posted by pearcey2 View Post
                              From what I can tell in Australia, you have to declare it as income. No other clever ways around it

                              Sent from my Nexus 5 using Tapatalk
                              Yeah, that's my understanding (But I'm not an accountant)

                              You just need to "cop it sweet" and pay the marginal tax rate on your capital gains once you withdraw.

                              Alternatively you can let it continually compound into a life changing amount of money, transfer it to the Bahamas and live out your days there.
                              Would you like free lifetime access to our forex trading room?

                              Open an account at Blueberry Markets and save the $97/monthly fee.

                              Click here to find out more.

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