Tax on trading as 1st or 2nd income

Rocksolid

Hello,
How it works the tax declaration with trading as 1st or 2nd income?

1st income
- My only income would be from options trading or selling stocks, so basically I have only one chance for 12300 free tax allowance, I understood that I won't get a 2nd chance in my second income to get the same, please confirm. Also, there is no second income in this case, I believe that's the reason.

- Dividend allowance is up to 2k 

- I have to pay national insurance but I may have the chance to pay less pension contribution if not zero, that honestly is useless for me, so good one.
- Should I declare myself self employed?

- If so, should I open a VAT? Not sure in UK, but in my country you can't be self employed without VAT.

- Can I decide then to use this income to invest mostly rather than paying to myself all the possible monthly salary? This is to avoid to pay taxes in the current year, so I'll pay the big chunk of taxes when I'll decide to move all into dividends funds (sell off involved).
So basically I pay myself a small portion of the salary every month rather then all.

2nd income
- Allowance up to 12300 for options trading and stocks

- Dividend allowance is up to 2k 

- National insurance and Pension contribution are paid from my company.

Did I miss anything?

In the end, the objective is to make option trading my 1st income, then live off dividends one day.

Regards.

Jeremy535897

I am not sure what you are asking, but I will comment as follows.

Trading in options is almost never treated as trading when done by individuals. This means that you won't be self employed, and you won't pay national insurance. You don't need to worry about VAT either as you won't make taxable supplies.

This may not be the case if you operate through a company. You would be an employee, not self employed.

This is a complex area and you need proper professional advice.

Rocksolid

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

Dazed_and_C0nfused

Your second post reinforces the fact that this is the best advice you will get on here.

This is a complex area and you need proper professional advice.

macman

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

Jeremy535897

macman said:

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

I think all OP's supplies would be exempt, so registering for VAT would not help as no input tax would be recoverable.

Rocksolid

Jeremy535897 said:

macman said:

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

I think all OP's supplies would be exempt, so registering for VAT would not help as no input tax would be recoverable.

Can you clarify this point?

Rocksolid

macman said:

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

A tax accountant will be needed anyway

Jeremy535897

Rocksolid said:

Jeremy535897 said:

macman said:

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

I think all OP's supplies would be exempt, so registering for VAT would not help as no input tax would be recoverable.

Can you clarify this point?

To register for VAT you need to make taxable supplies (sell goods and services). Trading in options does not normally involve taxable supplies unless you buy and sell the underlying assets. This is a very complex area. See https://www.gov.uk/government/publications/vat-notice-70149-finance/vat-notice-70149-finance

oldbikebloke

rocksolid is a well known spammer of these boards

macman

Rocksolid said:

macman said:

Rocksolid said:

I hope this professional advice doesn't cost me a piece of lung .

I want to become a trader full time, so I was asking what happens in terms of taxes at that point if that's my only source of income.

If I make more than 70k per financial year, for my knowledge I need a VAT.

I need to pay anyway taxes and national health insurance in somehow, then obviously I'll add a private one by myself.

The VAT is useful to deduct many expenses such as devices, monitors, and all the rest of the things.
Probably also charges from brokers and financial tools, but I'm really not sure about it right now.

The VAT threshold is currently £85,000, not £70,000. That is based on turnover, not profit. Below that level, it's optional. Until you reach that level, at which you have no option, registering for VAT is unlikely to be worthwhile, just to be able to claim back the VAT on a one-off purchase of a laptop or monitor, which is tax deductible anyway as a capital expense if purchased purely for your business.
If you operate a a sole trader, below the VAT threshold, then you can do your own accounts and self assessment return. Once you start to involve VAT or form a limited company, you will almost certainly need to employ an accountant.

A tax accountant will be needed anyway

Not if you wish to do the work yourself and operate as a sole trader.