buying and selling shares

craig1000

hi i have recently in this new tax year began dabbling in buying and selling shares. i work self employed and do a tax return each year, when it comes to my return for this year next april time how will the money i may make in profit from shares trading affect my self employed return ect, whwn i buy shares i get charged a tax then, what is it and if i have to declare any profit as self employed earnings then do i put down my deal commision my broker charges as expenses and what about the tax i get charged when i buy the shares initially. any pointers would be greatly appreciated???????????

p00hsticks

I'm not an expert, but I think it may depend on what you mean by 'dabbling'. If you are just buying and selling shares occasionally, then any profit would count as a capital gain - so if you make more that your capital gains allowance (around £10k) you would have to pay tax on the extra. Profits (and losses, which can be carried forward to offset gains in future years) should be declared in the capital gains section of the self assessment form - you need to tell HMRC if you don't get a form and need to declare capital gains or losses.

If you are trading very frequently though, I guess there may be a point where your trading is seen as a form of employment, in which case perhaps your profits could be seen as income rather than capital gains, and so liable to income tax rather than CGT ?

mark13

If you atre dealing within a self select ISA then all gains are tax free.

Pennywise

Forget the taxes you pay when buying and selling shares, i.e. stamp duty and VAT - they are separate taxes and nothing to do with the eventual capital gains tax or income tax on whatever profit you make. All costs incurred with buying are included in the book "cost" of the shares, i.e. brokers fees, taxes, etc. All costs incurred when selling are deducted from the "proceeds" i.e. brokers fees, taxes, etc. The difference between your book cost and net proceeds is your profit on which you may be liable to capital gains tax or income tax/NIC.

Whether CGT or IT depends on the volume of transactions, how much time you spend engaged with it, what resources you are deploying etc. If you are just dabbling in your spare time, just from reading the sunday papers, then it's capital gains tax and you can deduct your annual CGT allowance from profits. If it is taking up most of your time, you're subscribed into specialist live data feeds from the stock markets, and you're doing lots of deals, then you're probably trading and you are liable to income tax/NIC like any other business. There is no "limit" deciding this - it just depends on your personal circumstances - but the vast majority of amateur share dealers are under CGT.

TM1976

As Pennywise says, there is a difference here if you are trading (taxed under Income Tax) and making a small amount of capital transactions (taxed under Capital Gains Tax).

Based on what you say here I would say you are definately under CGT, in order to be under IT you would effectively be a hedge fund.

A taxable gain is basically proceeds less cost of shares. You can make £10k in a year in capital gains before you start having to pay tax so if you can consitently make money (well done, it's not easy) it's a good way of generating taxfree income.

craig1000

thanks all, i am looking to try and trade relatively frequently i.e buy cheap and sell at profit but its not a daily occurance, on average since started in april prob made 1-2 deals per week? would that be ok or can i make as many as i like as long as i dont exceed the 10 grand?