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

premiumz

Hi,
As I understood, stock trading profits/losses fell under capital gains tax not income tax. The thing that's got me confused is, I keep reading conflicting articles that say it's capital gains tax and then another that says income tax. So which is it?
I run my own company from home and pay income tax. Would my investing still count towards my income tax bill or would that be capital gains tax? I file my taxes online through self-assessment.

Many thanks

Jeremy535897

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.

premiumz

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

[Deleted User]

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

From what you have said above it is capital gains.

When you say that ‘you run your own company’ do you mean that it is a registered limited company with you as director/ shareholder?

premiumz

[Deleted User] 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

From what you have said above it is capital gains.

When you say that ‘you run your own company’ do you mean that it is a registered limited company with you as director/ shareholder?

I do own a limited company but it is dormant. At the moment I am running as self-employed. So my self-employed venture is not a limited company. I just say I run my own company, but technically it's called sole trader I believe. Something like that.

[Deleted User]

premiumz said:

purdyoaten2 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

From what you have said above it is capital gains.

When you say that ‘you run your own company’ do you mean that it is a registered limited company with you as director/ shareholder?

I do own a limited company but it is dormant. At the moment I am running as self-employed. So my self-employed venture is not a limited company. I just say I run my own company, but technically it's called sole trader I believe. Something like that.

Fair enough - unfortunately not everyone has that knowledge. There are instances where it COULD be viewed as trading in shares but, as Jeremy says, it is very unusual. On the basis of what you have said you would complete the capital gains section.

premiumz

[Deleted User] said:

premiumz said:

[Deleted User] 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

From what you have said above it is capital gains.

When you say that ‘you run your own company’ do you mean that it is a registered limited company with you as director/ shareholder?

I do own a limited company but it is dormant. At the moment I am running as self-employed. So my self-employed venture is not a limited company. I just say I run my own company, but technically it's called sole trader I believe. Something like that.

Fair enough - unfortunately not everyone has that knowledge. There are instances where it COULD be viewed as trading in shares but, as Jeremy says, it is very unusual. On the basis of what you have said you would complete the capital gains section.

Okay, thanks.
What about expenses? For example, broker fees, equipment, certain programs I am paying for on a monthly bases that are related to stock trading. Would they be an expense to write off against my income tax or would that fall under personal expenses and therefore not able to write that off? Because that would not come under a capital gains tax loss would it?

Jeremy535897

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.

lr1277

I agree with the others in that you should treat these gains and losses as CGT. You may be aware of the following having completed a self-assessment return but the only time Income tax and CGT are inter-twined is working out whether you are in the higher rate tax band. You need to add up your incomes and your gains and losses and apply them to the tax bands. A couple of years ago, I had sod all income, but a hefty capital gain from selling a property, so was in the higher rate tax band for CGT but had to pay no income tax. If you need more details, look up CGT on the .gov website.

[Deleted User]

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.

premiumz

[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?