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Forex Trading Tax UK: General Principles

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Only a few beginners pay attention to taxation issues at the beginning of their trading career, and such a careless approach may result in penalties and other problems with authorities. We recommend you sift this issue to the bottom right away so that you have the time to fix and prevent most possible problems before authorities get interested in you.

The best news is that, if such trading is just a source of small additional income for you and the authorities will categorize you as an ordinary speculator, you will avoid taxation at all.

But if you treat this activity as a real business, then you will have to pay taxes. However, in response, you will also get protected from losses, which is an advantage. In such a situation, HMRC will apply one (or more) of the following types of charges to you. In practice, in many cases, the Forex trading tax UK regime is determined automatically based on the volume of income, employment status, and other aspects.

  1. Income tax (which is paid by private individuals on the overall volume of earnings).
  2. Capital gains (charged from profits from the sale of shares).
  3. Corporation (applied to limited liabilities)
  4. Stamp Duty Reserve (charged when one buys shares).

As a rule, all the traders who are considered serious businessmen by the system must pay income duties.

Another important aspect relates to the instruments you use. If you prefer CFDs, cryptocurrency, binary options, commodities, you are obliged to pay both the capital gains and stamp duty reserve charges.

 On the other hand, all the money you earn from spread betting must be classified as gains from gambling. It is not subject to the charges mentioned.

In addition, your personal tax status plays a decisive role. For example, if you are not registered as a sole trader or a limited company due to the fact that you use trading for subsidiary earnings only, you will pay personal income taxes. However, if it is your major source of income, you must register as self-employed (it is the most widespread option), but the taxation scheme will remain unchanged for you.

And in the end, we must highlight one more crucial security measure that will help you avoid unnecessary investigations, penalties, and other related problems ― register with a licensed broker. If you work in the UK, we would recommend eToro or Admiral Markets.

In sum, your taxation scheme depends on a wide array of factors: from the volume of your incomes to the assets you utilize. Above, we provide general guidelines so that you get at least a basic idea of how everything works. Yet, every situation is unique, so, if you feel that you lack the experience to deal with this aspect on your own, turn to a professional. That will save you both money and nerves.