Another tax question

Trading Discussion Trading Lifestyle
1

Hi,

I’m moving from the UK to another country where unfortunately forex trading is taxable…

So I need to look at my profit and losses, but not sure how to calculate things.

From people who know the answer for definite, how do I work it out?

I will obviously be working out from x date to x date (the financial year), but I’m not sure if I should be looking at figures sat on my broker account ( say broker x I made £200 in the year and the money is still with the broker), or it’s not basically “profit” until the money is withdrawn?

The last way would mean timing could be used to possibly reduce tax liabilities in a given tax year.

Any info is appreciated!

Thanks

2

Moving to what country?

3

Thanks for the reply, I’m moving to Portugal, but I don’t think the country is so important, just really the way profit is usually calculated for forex.

Portugal and UK work in the same way regarding how tax is generally worked out, thinking about it, it would make sense if it was worked as Broker has a balance of x amount of money on the first day of the tax year, and x amount on the last day, so the profit/loss is the difference in between.

But I don’t know for sure, and forex isn’t an area of expertise for my accountant.

Thanks

4

I think its a legit question to research but I doubt the answer will help. As a parallel example, when you sell shares which you have bought through a broker, the profit counts towards your tax liability as soon as it touches your account with the broker - you get no allowance for not withdrawing the money.

But this is the right time to be doing research. I would be particularly researching whether trading attracts income tax or capital gains tax, whether any forms of trading are treated differently for tax purposes and whether you can use losses in any year to offset tax liabilities in profitable years.

5

Thanks for the reply, I agree with you in that I imagine forex will be taxed the same way, once it hits the broker and is equity…

Forex in Portugal is taxed as a capital gain, it’s taxable at 28% and there is no allowance, which is pretty rubbish, but I’ve chosen to live there so need to accept the tax system!

However crypto gains aren’t taxable, so I’m clearly now looking at trading crypto as well :slight_smile:

6

Ive had similair thoughts IE what if your tax bill for trading is £2000 but the money is sitting in draw down in your account. How can you pay it?

7

I think that is one of the issues, until the trade closes in a loss, you still have the equity, so tax is charged on that equity.

8

I kind of suspect that an open trade is not liable for tax. Capital gains taxes are paid on profits realised from the disposal of assets - think of your open position as being like any asset, e.g. a Van Gogh on your wall - you bought it for £1M, its now worth £3M, but there is no CGT to pay until you sell it at more than what you paid. Likewise, if you bought it at £1M but its fallen in value to £0.5M, you can’t submit that as a loss to the taxman to offset your previous profitable years because you still have the painting.

9

And don’t go into crypto to avoid tax, that’s letting the tail wag the dog and you are risking far more than you could possibly save in taxes.

10

Or if in the UK just use a spreadbetting forex account to avoid tax liabilities?

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11

I’ll be a Portuguese tax resident, so what happens tax wise in the uk doesn’t matter unfortunately

12

Yeah I appreciate that it’s true, and will bare it in mind!

13

That’s a really good way of thinking about it! I mean for me it won’t matter in that sense, as the tax year is the calendar year in Portugal, so it’s unlikely I’ll have any positions open at new year :slight_smile:

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