What's taxable and what isn't in trading?

Hello :slight_smile: I’m looking to start getting into trading small amounts to get used to the market, how everything works etc, and then start investing more when I’m more confident. However I’m a bit concerned about taxes on income from trading - are they taxable just the same as a normal job? I’ve heard that some trading is counted as betting so isn’t taxable, does that not go for trading as a whole? I currently work part time and make a little bit under the first tax band (see here: salary-calculator.org.uk). I know how much money I can make before it’s taxable from that, but where do I go to actually pay taxes on it (if it is taxable, of course)?

Hoping someone here can help! Many thanks in advance, all replies are much appreciated :smiley:

yea this is one of the topics I’m curious about as well. How would you go about filing at the end of the year lol i mean i have my tax guy I go to so I’m sure he would know also lol

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It really depends what country you live in. I assume you are in the UK, in which cause currency trading is tax exempt if you use a spread betting account, opposed to CFD which will be applicable under capital gains tax.

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what about in the US

In the US if you trade spot FX then your gains will be taxed using the short term capital gains rate. If you trade FX through futures then your gains fall under the 60/40 rule where 60% of your gains are taxed using the long term capital gains rate and 40% is taxed using the short term capital gains rate.

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thanks! I also found the section in the pips school that discusses how filing would work

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Hi @justshell and @krugman25,

Actually, retail forex traders can take advantage of the exact same 60/40 split available to futures traders in the US. Furthermore, unlike futures traders, retail forex traders in the US have the added benefit of not having to use that 60/40 split in situations when it’s better not to do so as described in the following article.* How Currency Traders Can Reduce Their Taxes


*The tax treatment of your forex trading activities depends on your individual circumstances and may be subject to change in the future, or may differ in other jurisdictions. It is suggested that you contact a certified accountant for further information on your tax planning.

The 60/40 rule is almost always a better tax situation except in the case where you have large losses, but if you are planning on losing then why trade to begin with :joy:

You have to make a pretty big capital gain before it before it becomes tax payable in uk though !

The reason spreadbetting does NOT attract tax is because 90% lose 90% of their account in 90 days and they do not want you to be offsetting your gambling losses against tax payable elsewhere ! :wink:

Wow, I recently started to take an interest about that topic myself. It was very cool and unexpected to find answers on my favorite forum. Actually, the tax stuff is more complicated than it sounds. Because there’s some new information coming in all the time and you’re starting to feel like you don’t know what to believe.

Any securities bought and sold after September 1, 2004, attracts Security Transaction Tax (STT). It is payable in India on share trading. Returns on the tax sold within a year from the purchase are called Short-Term Capital Gains. STCG attracts tax and gets taxed at 10 per cent.

Similarly, any loss sold within a year from the date of purchase is called Short-Term Capital Loss. STCL is an offset against STCG during the financial year.

Any profit on stocks sold after a year from the time it gets purchased is called Long-Term Capital Gains. LTCG got exempted from taxes from September 1, 2004.

Loss on stocks sold after a year from the time it was bought is called Long-Term Capital Loss. LTCL cannot be offset against LTCG.

In the UK -

Profits from all financial spread-betting in the UK including forex are tax-free.

Profits from trading forex via CFD’s are taxable above the minimum threshold under Capital Gains Tax, the rate depending on your Income Tax rate.

All the gains that you make while trading are added to your other source. And these profits will be taxed in line with your income tax slab.

Lol! On point

Just a bit more flavour for anyone interested…

In the UK, profits from spread betting aren’t taxable but neither can losses be offset

Gains made on CFDs (like shares and other assets) are assessable under the Capital Gains Tax (CGT) regime. As an individual, your first £12,300 of gains in the year are exempt and then any surplus sits on top of your income and is taxed at the highest marginal rate: currently 10% in the basic rate and 20% higher (18% and 28% for residential property). There is currently speculation that CGT rates will be raised in line with income tax (i.e. 20% and 40%) but nothing confirmed yet - could be something in the next budget. Losses can be offset against gains and you can also carry forward losses to be offset against future years gains.

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