Do I have to pay tax on trading?

bostonerimus

Whenever you do anything financial you should understand the tax implications; that goes for spare time jobs, BTL or trading stocks and shares. Luckily the UK has tax free allowances for capital gains and dividend income that you should understand. You should also understand how to use an ISA. These are the basics and you should understand those before venturing into stock trading. Researching your "markets" without understanding the taxation environment is "putting t'cart before t'horse".

Reed_Richards

You have to report your capital gains to HMRC if the total values of your sales is more than four times your allowance, so more than £46,800 in the 18/19 tax year. So if you made 50 trades with an average sale value of £1,000 then you have to complete a CGT return reporting all 50 trades, even if there is no tax to pay at the end! It would not surprise me if your broker has to make a report to HMRC so I would not bank on them not finding out.

If you can do all this within an ISA then you are safe from CGT and have no reporting obligation for those trades.

londoninvestor

This is not a recommendation to spread bet... but spread betting profits are tax-free (as long as, per post #7, you haven't made trading your main job and hence become taxable on it as trading income.)

Reed_Richards

The operative word in "spread betting" is betting. Any profits you manage to make from gambling are free from tax.

londoninvestor

Reed_Richards wrote: »

The operative word in "spread betting" is betting. Any profits you manage to make from gambling are free from tax.

Well - you can create just the same exposures that you would from other sources e.g. buying shares, currencies etc. The risk isn't inherently higher because one instrument is formally structured as a "bet" and another isn't. (Compared to say, a standard equity brokerage account, you can of course be more tempted to lose your risk self-discipline, because it's easier to leverage up.)

The spread betting operators make their money from the spread and funding charges, so I suspect it would end up being an expensive way of doing your main trading.