I have been researching forex and am thinking of trading via a Ltd company.
I understand that as a UK resident this is more advantageous in terms of tax, as I could draw dividends after paying corporation tax on any profits.
Any possible downsides?
I am thinking of opening up a trading account in the name of my existing personal contractor company.
Thanks!
One possible downside I can think of is, since the vast majority of new forex traders lose money, could this negatively impact upon your company’s credit rating?
Whether that would be a potential advantage to a UK taxpayer varies, according to one’s personal circumstances.
In any event, it’s something one certainly shouldn’t do without taking professional advice from someone experienced, licensed and registered to offer it. (There are plenty of ACA’s in the UK who specialise in advising traders, and the Tax Advice Network, and various other institutions, are able to make recommendations in response to enquiries).
Yes - there certainly can be. Again, up-to-date, location-specific, professional advice is the only sensible way to proceed.
I trade via an offshore corporation for the obvious tax advantages you mentioned. Not only do you get tax benefits, but also the ability to write off any trading-related expenses as well. There are other reasons to structure your trading through a private company as well, but it’s best to talk to a professional familiar with the incorporation laws in your jurisdiction.
If you are trading with a decent amount of capital, then incorporating is generally worth the effort.
My advice: Open an individual trading account, fund it w/ 25% of the money you’d be looking to trade through your “LTD company” and trade it for 6 - 9 months straight (the longer the better). If you don’t blow the account and can actually come out the other end, then I’d say you should move forward.
Not sure on your background, but if you’re just starting out you’re going to be wasting time and effort setting up this “LTD company” when you’re not even sure you have a strategy. Kind of a cart-before-the-horse type of thing.
Whats 9 months if you plan on trading for the rest of your life?
Hi rom. I’m based in the UK. I believe it’s tax free as it is considered gambling. Also when u open account an account with UK broker, you have an option of whether you want it tax free. However, the spreads are higher. In fact this increased spread I believe is a form of tax. Generally, if u have other source of income, you won’t be taxed. What’s your experience level?
On the contrary, it’s only if you [B][U]do[/U][/B] have another source of income [I]which is related to spreadbetting[/I] that HMRC may try to tax your spreadbetting income. Under those circumstances (for example, if you’re also a “trading vendor” of products/services) they may then seek to interpret your spreadbetting profits as being “part of a broader taxable business”.
No [I]other[/I] UK taxpayer has ever been assessed for either income tax or capital gains tax on spreadbetting profits, regardless of whether or not it’s their sole income.
Maybe will good if trade with company, but for me still enjoy trade standalone with own risk, because if already managed money from investor it like as already have different responsibility in heart and might will regret if losing in trades and causing bakrupt investor
You’ve misunderstood what the discussion’s about: “company”, in this context, doesn’t refer to a managed fund - it’s just a way for an individual to do his trading accountancy/tax returns differently, by becoming the sole director of a limited-liability company, rather than as a sole trader. It relates only to law/accountancy, not to how one actually trades.
Many thanks for your reply lexys. Regarding your last paragraph, in that case, there’s no need to set up a limited company because if u are going to do forex trading full time and it is your only source of income, it will be tax free?
I don’t think that [U]necessarily[/U] follows: first, the “tax-free” aspect applies only to forex-trading [I]by spreadbetting[/I], for UK/Eire residents only; secondly, some people, because of their individual situations, can have reasons [I]other[/I] than just income tax and/or capital gains tax for deriving advantages from using a company (I do, for example: I’m UK-resident but not UK-domiciled - I’m one of those immigrants about whom one hears so much, these days). But my guess is that few people using spreadbetting would need or want to, as you say.
Again, the whole conversation probably illustrates how important it is to take advice on such matters from a duly licensed professional, rather than in a forum?
Unfortunately, no.
If profiting from spreadbetting represents your [B]primary source of income[/B] then it will be subject to tax & other deductions in the normal way.
You would be well advised to heed the warnings about taking legal & financial advice from appropriately [B]experienced[/B] practitioners.