UK taxation for futures and options trading

globalarbtrader said:
I'm not a lawyer, but I've done some research on this.

It's a capital gain, unless your trading is qualified as a 'business', in which case you'd pay income tax (you'd also be able to deduct trading related expenses from your income).

How this qualification happens is a mystery, but possible requirements probably are:

  • earning the vast majority of your income from trading.
  • trading in such a way that requires time, skill and expertise, and isn't just raw speculation. So a market making firm would see their profits taxed as income.
I'm just finishing up my first year of having trading as my only source of income. I've made some good money, which means my tax bill would be lower under CGT rules. It's also my only source of income. So it will be interesting how HMRC classify me - I'll let you know.
More...

Hi GAT - I know this is an old thread but did this ever get settled? I have just started trading futures and am trying to run some simulations on future net returns but not sure whether to use a CGT tax rate or income tax rate. Also if trading is subject to income tax and I have a loss making year which I cannot offset against other income (very possible currently) do you know if HMRC allows these losses to be carried forward. Thanks
 
Ken S said:
Hi GAT - I know this is an old thread but did this ever get settled? I have just started trading futures and am trying to run some simulations on future net returns but not sure whether to use a CGT tax rate or income tax rate. Also if trading is subject to income tax and I have a loss making year which I cannot offset against other income (very possible currently) do you know if HMRC allows these losses to be carried forward. Thanks
More...

I've been trading my own money now for 6 full tax years. The percentage of my 'income' that was trading income has varied between 0% and over 95%. In all of those years my trading profits have been taxed as CGT (basically that is what I have put in my SA, and that is what HMRC has used for the calculation).

As for offsetting / carrying forward losses, sorry I don't know for sure. I've never tried it under the CGT regime (not sure if it's possible with CGT), I just sell shares to make sure I always use the entire CGT limit even if I've made a loss on my futures trading (obviously if I've made a profit, then I try and crystallise losses in my long only portfolio to reduce the CGT gain).

GAT
 
I shall be carrying forward losses as I pay income tax as an options trader. I have had a couple of losing years in the past and this only offsets the next tax year. Wondering if I can claim CGT allowance on shares, though
 
If I'd been using this forum when the thread started I would have posted that in the UK you can use spreadbetting to access the financial markets. Spreadbetting profits are exempt from tax.
 
I think income or CGT are ok up to 50k yearly profit. Above that and LTD could work better. At least this was the advice I received from a UK accountant a few years ago.
 
cesfx said:
I think income or CGT are ok up to 50k yearly profit. Above that and LTD could work better. At least this was the advice I received from a UK accountant a few years ago.
More...
I had thought about that, but I'm really not money driven! I don't mind paying tax- though I resent council tax at £50 to get my bin(which I haul to the end of the driveway) emptied - you know what I mean!
 
tomorton said:
If I'd been using this forum when the thread started I would have posted that in the UK you can use spreadbetting to access the financial markets. Spreadbetting profits are exempt from tax.
More...
HMRC have got sniffy about this over time, but it doesn't work for me as the spreads on options are terrible.
 
I mind paying taxes. For me it's like paying protection to the mafia. If taxes were equal for all (%) and used well, then I wouldn't mind.
When I see budgets and money allocated on weapons, wars, divisions... And then tight on children school meal, homelessness and other poverty issue. I mind it very much and I have no shame in saying it. They should be ashamed at government for existing and wasting oxygen by breathing.
 
You must log in or register to reply here.
Back
Top