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This is what HMRC said when asked I fall under trading/investment :
As with any other activity, you need to consider the relevant circumstances as a whole before coming to a decision on whether the activity amounts to a trade or not. Generally, for individuals we take the view that transactions in shares which do not amount to investment are speculative transactions falling short of trading, unless there are particular factors which take the case ‘out of the norm’.
Shares which are dealt with speculatively or as investments are dealt with under the Capital Gains Tax rules.
That’s certainly good to know Jim thank you :)
appreciated solid
Don't allow fear of complexity with the IR to affect your judgment trading
The number of trades...or how long...or anything else...is irrelevant as far as they care
Its a simple number they want 'other earned income' and thats it
They really really don't care about the process you use to make it....I know I have spent hours with them discussing my various activities over the years
Ok thats all I have
Enjoy the day
Jim
Thank you so much jim, botbot, Johnny. Since this is my first time I was concerned and overthinking slightly haha.
But better be safe than sorry. And I feel once I get used to this process it’ll be seamless in coming years.
The main point I got concerned was about frequency of trades I did that is buy and sells over the span of last year.
I was worried HMRC might use these complex rules “badges of trade” to say I’m doing it regularly so I’m not investor anymore but a trader.
But my takeaways going forward :
- Get good ISA account and invest long term
- EToro / LSE Trade only upto 12300
- Keep frequency of trades to say 10-20 a month
Get rich!
Botbot Johnny to solid
Absolutely
If you can add you don't need an accountant
( I can lend you ace if you want ( cybernetic entity ))
All the revenue care about is how much 'extra other' income you earned... I can tell you from over 40 years both hear and over seas they don't give a fruit how you did it...as long as its legal
Kind things
Jimster
Solid.
Your Accountant is correct, you only need to provide the nett.
Also, honestly, you are over analysing this.
If you know the numbers you have, then report those, keep the audit trail yourself for back-up/just in case.
HMRC are not looking for people like yourself who might, maybe make a few hundred or maybe a thousand over the allowance.
You can always ring HMRC.! Believe it or not, they are very helpful (95% of the time when you get someone that hasn't been having a bad day.!)
http://cgtcalculator.com/algorithm.htm#sameday -> Talks about HMRC share matching rules.
Hi botbot,
Unfortunately I spoke to EToro and they leave it upto clients to file their CGT and keep track of records. So I am on my own here.
I am spending about 100-200 Quid to do the calculations with an accountant to make sure my number is below the allowance.
I ended up with that figure by just adding all profits for net gain and adding all losses for net loss.
However when we factor in these rules ( See below ) total gain can actually be higher possibly.
I will spend next few days to calculate and update you guys to let you know how I arrived at this. I am about to try this :
http://cgtcalculator.com/ -> It apparently does a good job by factoring in all the rules. So I'll see what number I land into. But it needs input in certain format so bit of manual work involved.
Accountant just confirmed to me that I don't need to report every single transaction with HMRC, just net gain is enough apparently.
Same day rule, 30 Day rule ( Bed and breakfast ) , all other shares average cost basis ( Section 104 ).
Solid Snake.
Your Investment Provider (AG Bell, eToro, Fidelity etc) should be able to provide you with a GCT tax view report.
If the number is above allowance, you pay, if it's not, you don't.!
You can declare the loss if you have one, but if a profit, then don't bother, unless it's over the CGT allowance.
Thanks SS
Hi Smalltrader,
Losses from trading cannot be included to reduce income tax I paid as part of my full time employment.
Because I am not self employed / doing trading full time. So as a retail investor losses/profits are all chargeable under CGT which has no bearing towards personal tax allowance or income tax you pay as part of employment ( if you are full time employed that is ).
Hi SS, did you find out if the losses from trading can be included to reduce the employment tax paid when no profits were made from trading for the year?
I know it is bit cheeky to ask that but just wondering if that is possible :-)
Hi Johnny, you are correct. Spread betting is exempt from CGT. CFD Trading still incurs CGT.
For Tax year 2020 - 2021 :
My total accrued profit ~GBP32000
My total accrued losses - ~GBP20600
Total gain 32000 - Total loss 20600 = Net gain GBP11400
Since this is under GBP12300 I am assuming I don't incur any CGT.
But I am planning on getting accountant to work out correct values. Because there are all these complex rules : Same day rule, 30 Day rule ( Bed and breakfast ) , all other shares average cost basis ( Section 104 ).
SS
CGT
total profit total loss pay up if over limit
All capital included
Assuming some of you report gains as CGT here, do you report every single trade you performed in that year? or just report overall CGT if its over the threshold?
Posted on the retirement last week how it's best to make full use of £20,000 a year allowance in an ISA. Paperwork is a headache and theses accounts along with SIPP's offer a solution.
You need to be selective when considering an ISA especially when you're an active trader. Dealing costs can mount up quickly. I notice in the links below some dealing costs are zero but what's the spread when you are trading ? They've got to make money out of you somewhere. Your broker needs to make full use of the many market makers out there so you get a competitive price. Commonly known as price improver. Another one , have you had trouble dealing on busy volume days. ? Not much good if you struggle to get a price. Need a broker where the system runs smoothly. Maybe create a thread to chat about various brokers before you sign up ?
https://monevator.com/compare-uk-cheapest-online-brokers/
https://langcatfinancial.co.uk/publications/guide-to-isa-investing-2021/
Botbot,
you said : "Two levels of tax, one is paying under 40% tax through your employment, and the higher rate is paying even £1's worth above the 40% in your employment."
In this case it will be 20% for higher rate tax payer for CGT and this has nothing to do with employer and income I earn from my full time job as that is taxed separately via PAYE and comes off of personal tax allowance.
Thanks for the replies guys, just finished the call with HMRC after 1 hour on-line.
Summary :
- CFD are taxable under CGT as chargeable assets
- I am not self employed and this would count as investment not trading
- He mentioned that if I am doing this as full time job and my employer is also into stocks etc. Then it would be counted as trading.
Links he shared :
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56100 - For capital gains using CFD
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20060 - Business manual to determine if I am trading or investing
https://www.gov.uk/government/publications/statement-of-practice-3-2002/statement-of-practice-3-2002 - Guideline for CFD and how it is taxable as CGT not Income tax.
botbot is correct
Don't worry toooo much about how you earned the money...just tell HMRC that you have it
You are doing the right thing by talking to HMRC ( they are obliged to help you )
But
You do not need an accountant to tell you what you already know
Declare it on your SA800 form ( all downloadable )
And if you so choose add an explanatory note in the box provided
Have fun
The Jimster
Solid Snake.
A is the right answer.
If you SOLD and made the profit, and you SOLD and made the loss, and those are the correct two numbers you have.
You have profit less loss =........then take off CGTA = tax to pay.
Two levels of tax, one is paying under 40% tax through your employment, and the higher rate is paying even £1's worth above the 40% in your employment.
If you SOLD and made a loss in the previous years you can bring that forwards as well.
So it would be Profit less this years loss less previous years loss =......... less CGTA =.........
Hope that helps.
Calling HMRC now and speaking to tax accountant later. Will report my findings here..
RR101, Spread betting is capital gains free from what I read online.
smalltrader, I don't have ISA I used eToro to buy RR shares as CFD with leverage.
Going forward based on how tax turns out I will certainly switch to ISA to reduce these headaches
Hi SS, do you not have your shares in ISA, which is a tax free?
I see you mentioned that you have 66k shares invested in RR. If these shares are not in ISA and if RR explodes at some point then I hate to see you pay tax on your gains. If possible move your shares to ISA. If they are in SIPP then nothing to worry about tax for now. GL
Following, I’d also like to know from last year when I lost through spread betting. Although I was under the impression spread betting didn’t fall under any taxable gains due to the nature of it.
All the profits and loss figures I shared are for closed trades. Not open ones.