UK taxation for futures and options trading

TBJ said:
Question! If one do option trading for spare time especially trading for own personal account say 10 per day (buy and sell) for the year, while working full time, then would it mean gains (or losses) would be liable to U.K. income tax, instead of capital gains? And in case of income tax, do we use turnover (all sells of options bought) and then offset expenses (purchases of options) right?
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The honest answer is I don't know. Certainly if you were trading futures or stocks, there is no way it would be treated as income - it would be CGT. But I've heard people say that all options trading is treated as income; but I haven't seen a reference for that.

Income would be calculated as sales - premium paid - commissions.

You can also deduct trading expenses, data feeds, interest expenses if you're subject to income tax; if it's CGT you can't.

You could also use mark to market if you were running through a limited company.

GAT
 
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I have been paying self employed income tax on options for 20 years- the key question is turnover, it's easy enough to do P&L, as I'm sure you know. Capital gains is for shares- they don't understand options at HMRC !
 
Windlesham1 said:
I have been paying self employed income tax on options for 20 years- the key question is turnover, it's easy enough to do P&L, as I'm sure you know. Capital gains is for shares- they don't understand options at HMRC !
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Ok thanks, what is this key question about turnover? And I assume options purchased and sold are VAT exempt, correct?
Also for this turnover I would assume is total sales from selling options purchased alone. Then offset them vs option premium paid and commissions? Then throw in expenses and so on
 
Turnover is the total amount going through the account. there's no VAT, only income tax as self employed trader. So yes turnover is no profit, it's everything before losses/expenses etc. Example selling strangle for 20 = £200+ ssay £10 comms= turnover. Deductions later are for profit or loss. Options trading is classed as income not capital gains.
 
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Never yet met an accountant who understand options- but for tax it's simple P&L . Turnover minus allowable deductions, don't ever try to explain options to HMRC!
 
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