Where do I stand with eToro?

Trunk_z

Hey guys,

So, I've been researching various trading platforms (mostly crypto-currencies) for the last two years - mostly Bittrex, Poloniex and eToro.

My question is with eToro. Soon, I'll hopefully be at a stage where I want to withdraw. I know that tax is a thing, how does it work?

I've only ever had a job (still do!), and money hits my account monthly and I'm happy, and I don't do anything further.

Do I need to do anything? Or just hit withdraw and wait for it to hit my account? Does it count as an income?
I've heard that some people set themselves up as a company to maximize their profits - is this true? Where would one begin?

Looking forward to your suggestions,
Chris

Keep_pedalling

Any profit over your annual allowance (£11,300) will be a taxable gain. It is your responsibility to report that gain to HMRC.

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax.

Eco_Miser

It's not income, the difference between what you put in and what you get out is a capital gain (or loss) and subject to Capital Gain Tax. See the link in the post above for details.

Trunk_z

Thanks for the replies.

Is that to say, that until I have withdrawn £11,300, I don't need to declare anything?

Am I correct in thinking that this is annual allowance is different from the tax I pay from my salary? For example, the first £11,500 of my wage isn't taxable AND the £11,300 profit isn't taxable? Or, is it the same amount.

Regards,
Chris

System

I do not know much about eToro, but your liability for capital gains tax occurs when you sell an asset and not when you withdraw money from a broker. It is not clear what you have been doing on eToro, but you must have been doing more than researching trading platforms!

Trunk_z

Economic wrote: »

I do not know much about eToro, but your liability for capital gains tax occurs when you sell an asset and not when you withdraw money from a broker. It is not clear what you have been doing on eToro, but you must have been doing more than researching trading platforms!

Well, it started as research :P
I was researching, then I decided to go for it after 2 years of weighing up my options and weighing the risks. I just didn't research the tax part until now.

It's slightly confusing, I'm not selling assets myself. eToro is doing that on my behalf (is there a difference in the tax man's eye?). Also, it is not being done in GBP, I am working with USD - does that make a difference?

ColdIron

Trunk_z wrote: »

Am I correct in thinking that this is annual allowance is different from the tax I pay from my salary?
Chris

Yes

For example, the first £11,500 of my wage isn't taxable AND the £11,300 profit isn't taxable? Or, is it the same amount.

The first is your Income Tax Allowance
https://www.gov.uk/income-tax-rates

The second is your Capital Gains Tax Allowance
https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

System

Trunk_z wrote: »

Well, it started as research :P
I was researching, then I decided to go for it after 2 years of weighing up my options and weighing the risks. I just didn't research the tax part until now.

It's slightly confusing, I'm not selling assets myself. eToro is doing that on my behalf (is there a difference in the tax man's eye?). Also, it is not being done in GBP, I am working with USD - does that make a difference?

What do you mean by eToro is selling on your behalf (you have invested in a fund of some type)?
Working with USD makes no difference, but you will have to work out the gains in GBP.

theGrinch

the answer isnt that simple. There are various tests to be applied. It depends if you are trading (that has its own definition), other income you make and the time you are spending on it

Malthusian

There is very little point working out your gains now because by the end of the tax year the picture will have changed completely. You will need to work out at the end of the tax year the total gains on all the sales you have made. If the total gains are over £11,300 you will need to pay CGT. If they aren't but you sold more than £45,200, there is no tax to pay but you need to report the sales via self-assessment anyway.

If you don't know what assets eToro is selling on your behalf and there's any chance you might have more than £11,300 you need to get a grip of your tax planning urgently.

Trunk_z

ColdIron wrote: »

Yes

The first is your Income Tax Allowance
https://www.gov.uk/income-tax-rates

The second is your Capital Gains Tax Allowance
https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

Thank you for the clarification =]

What do you mean by eToro is selling on your behalf (you have invested in a fund of some type)?
Working with USD makes no difference, but you will have to work out the gains in GBP.

Yes, I'm using one of the copy-fund products. You can copy other people as well, but my research showed better results with a copy-fund.
Would I work out the GBP at the time of calculating and paying the tax? As obviously this number will fluctuate.

There is very little point working out your gains now because by the end of the tax year the picture will have changed completely. You will need to work out at the end of the tax year the total gains on all the sales you have made. If the total gains are over £11,300 you will need to pay CGT. If they aren't but you sold more than £45,200, there is no tax to pay but you need to report the sales via self-assessment anyway.

If you don't know what assets eToro is selling on your behalf and there's any chance you might have more than £11,300 you need to get a grip of your tax planning urgently.

I'm just trying to get a handle on it now, so that I can go in prepared if I need to at the end of the tax year. Would the tax, if any, be paid in a lump sum? I'm imagining that you perhaps get a bill after submitting paperwork?
I know exactly what eToro is doing, I track it all on their website, plus on my own spreadsheet which I update daily.