Trading with UK tax


I have been dedicating all of my free time to learning about trading forex, Indices and commodities mainly through swing trading as this suits me. I’ve used a few different brokers for demo accounts and chosen the one I want to use (Oanda) and have gotten used to the platform taking it slowly and learning as much as I can.

With regards to UK tax laws, I need a few questions and tips. I would ideally like to stay clear of UK tax and trade tax free if possible but don’t know if spread betting accounts are really worth it.

If I start trading with a CFD account how am I taxed, how does HMRC know how much my P/L are each month /year?

Do I just start trading and wait for a tax bill to come through? Is that how it works?

Would I be better off using a spread betting sub account on Oanda?

What are the pros and cons of spread betting?


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Spreadbetting is tax-free, no matter how much you gain. You do not have to keep records or submit anything to HMRC.

You would have to pay capital gains tax on gains from CFD trading above the annual personal CGT allowance. But you would need to retain records of all trading every year and you may need to submit a Self Assessment form every year. The allowance and the tax rate are liable to revisions periodically.

Maybe CFD’s are available on more products and have narrower spreads than SB but these factors are unlikely to be the difference between making a profit and not making a profit.

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With spread betting, you are currently exempt from UK Stamp Duty and Capital Gains Tax. But you cannot offset your losses against tax.

With CFDs, there is capital gains tax. But losses can be used to offset gains.

OK, thanks for the swift replies!

For a CFD Account would one generally setup a UK Ltd company or be a Sole Trader?

I take it the main benefit is the fact you can claim tax relief on losses as if it is an expense to your business?

Regarding both, if I profit say £10000 (taxable, just as an example) with both accounts would I be making 20% less on the CFD account but be under the safety net of offsetting losses?

Are there any further hidden charges for SB Accounts or are people generally out off them as they are unsafe?

What do people generally use on here?

Thanks again!!

Most people would not set themselves up as companies etc., there’s no great tax advantage. If you are trading CFD’s and have losses in a year you can off-set these against the tax you have to pay in your profitable years.

The CGT you pay is on the profits above the personal annual allowance - this is currently £12000 per year, so your first £12000 of profits trading CFD’s is tax-free. If you make e.g. £13000 profits, you would be liable for only 10% of £1000 (if your overall annual income is below £50,000: if your overall annual income is above £50000, the CGT rate goes up to 20%). But this is payable only on the profits above the tax-free allowance.

I’m going to suggest that very few people have a regular profit from trading of more than £12000 per year. Which means that all the profit and loss and tax record-keeping and forms involved in CFD trading is a complete waste of time.

Yup, in UK definitely do spread-betting not CFD. If you are having to offset losses against tax then you’ve prob got wrong trading strategy. At least with spread-betting you don’t have to pay any tax on the profits you are hopefully making. PS if you are spread-betting don’t do it via a company - that would make you a professional trader and liable to income tax/company tax /whatever it’s called… I know pros get more leverage, but you don’t need higher leverage if you are winning.

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