What's the deal with tax on stock trading profits/losses

[Deleted User]

Yes - with one very subtle difference. You can restrict the utilisation of the loss carried forward so as not to waste your annual exemption. For example:

2020/21 Losses 16000 Gains 12000. The unused loss of 4000 is carried forward and the annual CGT allowance of 12300 is wasted.

2021/22 Gains of 13000. 700 of the previous loss can be utilised to reduce gains to 12300. The remaining 3300 is carried forward indefinitely.

CKhalvashi

premiumz said:

purdyoaten2 said:

Jeremy535897 said:

premiumz said:

Jeremy535897 said:

Capital gains tax unless your company is a share dealing company and it, rather than you, buys and sells shares. HMRC may treat certain individual share dealers as trading, but it is most unusual.

When you say that HMRC may treat certain individual share dealers as trading, what do you mean? This is what confuses me. I am self-employed and run a business but I also stock trade to try and earn extra money. Some of my positions are long term and some are very short term. (often less than a day) So what does this fall under? Capital gains tax or income tax? I'm about to submit my self-assessment, so that's why I am asking.
Also, if it's capital gains tax do I just submit it through the self-assessment form at the same time as I submit my income tax report?

Thanks

It's capital gains tax and you report it through self assessment as capital gains. Only people connected to exchanges dealing as a full time job could be considered as trading.

Although this is an interesting case:

https://www.rossmartin.co.uk/sme-tax-news/3374-share-dealing-is-a-trade-hmrc-late-evidence-not-admitted

Note that no precedent was created.
I once had a client who traded in one well known FTSE company multiple times - I am talking up to ten times a day! He did this for about eighteen months and wanted to be classed as a self-employed trader until Class 2 and 4 NIC was mentioned. The CGT computation on over 500 trades was interesting.

With losses on trading stocks, if the losses outweigh the gains that year then it can be carried forward into following years to counter capital gains tax in the future. That's correct isn't it?

It should be the case, however I believe there is a 6 year limit for claiming the relief on losses.

Of course, income of one type can't be set off against losses on another type. I know you're not suggesting this, but just wanted to make it clear to OP.

[Deleted User]

CKhalvashi said:

premiumz said:

purdyoaten2 said:

Jeremy535897 said:

premiumz said:

Jeremy535897 said:

Capital gains tax unless your company is a share dealing company and it, rather than you, buys and sells shares. HMRC may treat certain individual share dealers as trading, but it is most unusual.

When you say that HMRC may treat certain individual share dealers as trading, what do you mean? This is what confuses me. I am self-employed and run a business but I also stock trade to try and earn extra money. Some of my positions are long term and some are very short term. (often less than a day) So what does this fall under? Capital gains tax or income tax? I'm about to submit my self-assessment, so that's why I am asking.
Also, if it's capital gains tax do I just submit it through the self-assessment form at the same time as I submit my income tax report?

Thanks

It's capital gains tax and you report it through self assessment as capital gains. Only people connected to exchanges dealing as a full time job could be considered as trading.

Although this is an interesting case:

https://www.rossmartin.co.uk/sme-tax-news/3374-share-dealing-is-a-trade-hmrc-late-evidence-not-admitted

Note that no precedent was created.
I once had a client who traded in one well known FTSE company multiple times - I am talking up to ten times a day! He did this for about eighteen months and wanted to be classed as a self-employed trader until Class 2 and 4 NIC was mentioned. The CGT computation on over 500 trades was interesting.

With losses on trading stocks, if the losses outweigh the gains that year then it can be carried forward into following years to counter capital gains tax in the future. That's correct isn't it?

It should be the case, however I believe there is a 6 year limit for claiming the relief on losses.

Of course, income of one type can't be set off against losses on another type. I know you're not suggesting this, but just wanted to make it clear to OP.

Not true. Losses can be carried forward indefinitely. Also trading losses can be set against Capital Gains but not the other way around.

A capital loss can be offset against capital gains of the same tax year, but cannot be carried back against gains of earlier years. If you have an unused capital loss, this can be carried forward indefinitely against gains of future years.

Jeremy535897

Yes it is. Furthermore, in the following year you can deduct your annual exemption before using those losses (but not in the year the losses are made).

It is important to claim losses on the self assessment return, otherwise they will be lost. See https://www.gov.uk/capital-gains-tax/losses

[Deleted User]

Jeremy535897 said:

Yes it is. Furthermore, in the following year you can deduct your annual exemption before using those losses (but not in the year the losses are made).

It is important to claim losses on the self assessment return, otherwise they will be lost. See https://www.gov.uk/capital-gains-tax/losses

Think you missed my earlier post.👍

CKhalvashi

[Deleted User] said:

CKhalvashi said:

premiumz said:

[Deleted User] said:

Jeremy535897 said:

premiumz said:

Jeremy535897 said:

Capital gains tax unless your company is a share dealing company and it, rather than you, buys and sells shares. HMRC may treat certain individual share dealers as trading, but it is most unusual.

When you say that HMRC may treat certain individual share dealers as trading, what do you mean? This is what confuses me. I am self-employed and run a business but I also stock trade to try and earn extra money. Some of my positions are long term and some are very short term. (often less than a day) So what does this fall under? Capital gains tax or income tax? I'm about to submit my self-assessment, so that's why I am asking.
Also, if it's capital gains tax do I just submit it through the self-assessment form at the same time as I submit my income tax report?

Thanks

It's capital gains tax and you report it through self assessment as capital gains. Only people connected to exchanges dealing as a full time job could be considered as trading.

Although this is an interesting case:

https://www.rossmartin.co.uk/sme-tax-news/3374-share-dealing-is-a-trade-hmrc-late-evidence-not-admitted

Note that no precedent was created.
I once had a client who traded in one well known FTSE company multiple times - I am talking up to ten times a day! He did this for about eighteen months and wanted to be classed as a self-employed trader until Class 2 and 4 NIC was mentioned. The CGT computation on over 500 trades was interesting.

With losses on trading stocks, if the losses outweigh the gains that year then it can be carried forward into following years to counter capital gains tax in the future. That's correct isn't it?

It should be the case, however I believe there is a 6 year limit for claiming the relief on losses.

Of course, income of one type can't be set off against losses on another type. I know you're not suggesting this, but just wanted to make it clear to OP.

Not true. Losses can be carried forward indefinitely. Also trading losses can be set against Capital Gains but not the other way around.

A capital loss can be offset against capital gains of the same tax year, but cannot be carried back against gains of earlier years. If you have an unused capital loss, this can be carried forward indefinitely against gains of future years.

Thank you for clarifying this, as I did imply I wasn't 100% sure.

I am not (and have never claimed to be) a tax advisor, which is why I know largely how things work for my own tax situation, but pay someone to do most things for me as they are the professional and save more than I pay them in general.

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

Yes it is. Furthermore, in the following year you can deduct your annual exemption before using those losses (but not in the year the losses are made).

It is important to claim losses on the self assessment return, otherwise they will be lost. See https://www.gov.uk/capital-gains-tax/losses

Think you missed my earlier post.👍

Yes, my browser didn't load it for some reason.

alewin

When are the actual Capital Gains or Losses taken into account, is it the date you actually sell the shares with the money sitting as cash in your trading platform, or only when you actually withdraw the money?

I've been messing about with the Freetrade app (non ISA) just for the free share. I have £20 as cash. £10 I invested myself, the other was a free share I sold, which I assume would have a cost of zero and therefore a gain of £10.

I know it's trivial but I fill out a self assessment every year, will I just have to enter £10 as the Capital Gains for the tax year about to end next week, or when I actually withdraw the money from the Freetrade?

I don't think it was worth the hassle really, and apologies if I hijacked the thread.

Jeremy535897

The disposal is when the share is sold, not when you withdraw the cash from the trading platform.
You do not need to declare capital gains if your proceeds are no more than £49,200 and your gain is within the annual exemption of £12,300. See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876771/SA108_Engish_notes_2020.pdf (the figures are out of date).

alewin

Jeremy535897 said:

The disposal is when the share is sold, not when you withdraw the cash from the trading platform.
You do not need to declare capital gains if your proceeds are no more than £49,200 and your gain is within the annual exemption of £12,300. 

Thanks for the info, I had just thought that because I fill out a self assessment anyway, I would have to enter any Capital Gains however small.