Found out today that in the USA 60% of the capital gains are taxed at the lower, long-term capital gains rate (currently 15%) and the remaining 40% at the ordinary or short-term capital gains rate, which depends on the tax bracket the trader falls under (as high as 35%)
So i want you to tell me how much u pay in your country.pls follow the format;
Canada - Capital Gains = 50% taxed at your marginal tax rate. So if your tax rate was 40%, gains would be taxed at 20%
However if trading of any type is your primary source of income, 100% of the gains are taxed as ordinary income.
I canāt trade with money which I donāt have already. If I deposit my money into a trading account, this is money I earned via income. So it is already taxed. If I make money with it, it will be taxed a second time, which is tax on tax. In my opinion this is not less than legalized socialistic robbery. :mad:
If I donāt make money, nobody pays for my losses. They just put their hands into my pockets to grab something, but donāt put anything in.
Now, after all I get problems if I donāt pay my tax, but not the robbers. Crazy world, eh?
Trading should be tax free, because the money is already taxed! Even the money which I get via trading is already taxed - by the other party!
Loses can be deducted from future assessments so you only pay tax when you recover losses and start to make ānew moneyā or put another way, you only have gains once all historical losses have been recouped.
Capital Gains Tax allowance is Ā£10,000 so this amount of gains is tax free.
After allowance (and deductions for losses) the first Ā£37500 is removed from your gains and taxed at 18%.
The remainder of gains that exceeds Ā£37500 is taxed at 28%.
Income tax is only used for money paid as part of PAYE (pay as you earn) so to have income tax on trading means your trading vehicle has employed you and pays other taxes like national insurance for you.
note on limited company use
Those who try to use a registered company to avoid income tax (which makes no sense for trading) where that company trades and the money there is the only money that person has and they are the only person in that company will be hit with income tax which is more or less first Ā£7475 free, 22% on the rest upto Ā£37500, 40% on the rest upto Ā£150000 and 50% on the rest to infinity (each amount is a running total on ur overall cash). Using a company properly leads to corporation tax which is 28% under the current government.
Note that one third 33% of all forex trading happens in the uk and most hedge funds here are registered in the two top tax havens (for british nationals) the British Virgin Islands and the Netherlands.
Thatās a great reply, it actually helped me to understand the taxation system within the UK, rather than being advised that higher earners will in essence pay around the 50% tax mark.
What would you say is the most efficient way to go about your tax so that you end up with the greatest amount net of tax after all deductions? This interests me as the way I see things, allot of investors in the UK are moving to other countries with lower taxation brackets, and this also falls into the category of a profitable forex traders.
I simply wanted an answer or a possible thought on the topic, not an ego drive response whereby you are āsuggestingā that I have no real financial profits that would even warrant such a question to be asked.
Although i appreciate your response, and agree that you seem well informed on the area, the opening few sentences where rather unnecessary.
The point actually wasnāt about your profits (I donāt know anything about you) but about the cost of setting up tax efficient vehicles abroad - I should have mentioned that and made myself a lot clearer - sorry about that.
Using a foreign vehicle requires foreign directors, lawyers and admin charges meaning that one needs to be aiming to protect a considerable amount of capital to make pursuing asset protection worthwhile.
What is taken away to cover expenses will be hit with tax while the rest is tax free or taxed low and thereafter subject to remittance laws that basically say if u bring it in we need to be told and tax it.
And if managing peopleās money there separate rules for setting up financial holding companies or pooled investment funds and higher setup costs and license requirements to protect investors.
It actually isnāt necessary to pay ANY tax on forex trading in the UK as it is possible to trade via a spreadbet which, at the time of writing, is free of both income tax and capital gains tax regardless of how much you makeā¦
This is true so long as you have a day/night job that earns you a living wage or takes up what the government considers reasonable amount of working hours.
Anyone sitting at home or in an office spread betting full time for a living or for the considerable chunk of their living is also subject to income tax.
Itās because of this and the potential for slightly higher spreads (and no tax relief on losses) that professionals end up using CFDs.
But yes, if you have a āreal jobā as the government sees it, all your proceeds from (spread) betting are 100% tax free.
I hear some MT4 brokers are dabbling in SB now. The question is if you have an EA making a heap of money for you, what they will say - If you work full time the current law says all the proceeds are yours tax free.
from where I come from, there are issues. Specially concerning gov.taxers and so on.
my earnings from forex is considered as money transfers which is not taxable (i think)
so basically I am not being taxed for my forex earning. Iām from the Philippines.
NO taxes in Algeria !! but we always have got that money transfer fees that always take from your profits some dollars ! but everything is fine there is no taxes for now )