Reply to: HMRC Tax Rules - Day Trading?

[bulltraderpt]

Not a good idea because isa dealing fees will eliminate your profits.
I suggest you use a broker set up for day trading such as Interactive Brokers (who I use).
Concentrate on getting your trading profitable first before looking at tax issues. If you ever do.

Hi,

I use interactive investor as they allow you to set up both accounts, i.e. cash in an ISA and a trading account. I don't use Interactive brokers as their fees are not cheaper than Iweb share dealing or iii.co.uk.
Yes I have been doing this for five years now and am nicely consistent, hence from what I have gleaned it looks as though there is no minimum or maximum holding time for shares in an ISA so as long as your strategies and psychology are aligned, there will be no tax ever to pay on profits, but of course one has to understand that losses incurred can't be offset IIRC?

Cheers.

[GJABS]

That's my take on it, but now you can day trade in an ISA account. So I suppose my question is if one states they are retired but day trades or swing trades for that matter in one successfully (i.e. makes over the CGT allowance per year), is the tax man going to look at you 'differently'?

Thanks

Not a good idea because isa dealing fees will eliminate your profits.
I suggest you use a broker set up for day trading such as Interactive Brokers (who I use).
Concentrate on getting your trading profitable first before looking at tax issues. If you ever do.

[bulltraderpt]

They are supposed to be free of tax, and indeed they are free of all taxes.

That's my take on it, but now you can day trade in an ISA account. So I suppose my question is if one states they are retired but day trades or swing trades for that matter in one successfully (i.e. makes over the CGT allowance per year), is the tax man going to look at you 'differently'?

Thanks

[GJABS]

Good Evening.

What about if you are trading in a stocks and shares ISA?

Those gains are supposed to be free of Tax.

They are supposed to be free of tax, and indeed they are free of all taxes.

[AtW]

Good Evening.

What about if you are trading in a stocks and shares ISA?

Those gains are supposed to be free of Tax.

Free of Capital Gains Tax...

[TheFaQQer]

[bulltraderpt]

If you trade regularly you will be charged at Income Tax NOT CGT. CGT is based on the risk of holding stocks for more than a month at a time. Day trading which can be a few days is charged at income tax.

How do I know? See my tax return. Horrible.

Good Evening.

What about if you are trading in a stocks and shares ISA?

Those gains are supposed to be free of Tax.

[BlasterBates]

I don't see the point of day trading, once you add in the costs of buying and selling and the higher tax rates you'll make less money than buying and holding.

Penny stocks are very risky, most of them go under. I have a long term strategy and I have seen some of my stocks become "penny stocks". Not one of them has ever recovered. I always write them off once they go "penny".

[KentPhilip]

Profits from spread betting are free from tax because it is regarded as gambling.
Someone told me that this actually benefits HMRC because it means you cannot claim the losses against tax (as someone else said). And that as HMRC know that people on average lose money spread betting, this means HMRC is in a better financial state as there are (net) fewer offsets against other income and profits from those people.

Sly..

[Wanderer]

Now i've decided to invest in stocks on a long term basis such as penny stocks.

You could just invest (gamble?) the company money rather than your own... At least that way if you make big losses then you may be able to write them off against company profits but ask your account first (presuming they are still talking to you after you spent your director's loan).

[lukemg]

Do you have any links to this info?

Initially i started day trading a few weeks ago and made more losses than gains. Now i've decided to invest in stocks on a long term basis such as penny stocks.

PLEASE BE CAREFUL, this is the same as gambling on horses and just as risky/likely to work financially i.e. no chance.
Best quote I heard about day trading was 'take 5 grand in notes into your back garden and set fire to it, sooner or later you will do that day trading'
Figures for numbers ending up skint is high 90's in percent I believe.
If you can't stop yourself, I would use a small percentage <10% of your investment pot for this OR penny shares and get the rest PCA'd into index trackers.

[TheFaQQer]

Do you have any links to this info?

Initially i started day trading a few weeks ago and made more losses than gains. Now i've decided to invest in stocks on a long term basis such as penny stocks.

I will not deal with any options, futures, derivatives spread bets etc, just purely stocks on the US market, mainly OTC (Sadly i can't make use of the ISA wrapper if i hold OTC stock)

So from what you're saying it seems that day trading is classed by HMRC as a job, hence liable to pay income tax, as opposed to an investor in long term stocks, who is liable to pay CGT?

My accountant isn't sure if day trading falls under CGT or Income Tax, depends on how long i hold the stock and is up to HMRC's discretion. Tried calling HMRC to get some clarification on this, but the technical dept always seems busy, so requested a call back twice but to no avail

There are no hard and fast rules, as even the HMRC guidance acknowledges (link)

In Lewis Emanuel & Son Ltd v White, the judge said that he saw short-term transactions as gambling so not trading.

[deeniguy]

If you trade regularly you will be charged at Income Tax NOT CGT. CGT is based on the risk of holding stocks for more than a month at a time. Day trading which can be a few days is charged at income tax.

How do I know? See my tax return. Horrible.

Do you have any links to this info?

Initially i started day trading a few weeks ago and made more losses than gains. Now i've decided to invest in stocks on a long term basis such as penny stocks.

I will not deal with any options, futures, derivatives spread bets etc, just purely stocks on the US market, mainly OTC (Sadly i can't make use of the ISA wrapper if i hold OTC stock)

So from what you're saying it seems that day trading is classed by HMRC as a job, hence liable to pay income tax, as opposed to an investor in long term stocks, who is liable to pay CGT?

My accountant isn't sure if day trading falls under CGT or Income Tax, depends on how long i hold the stock and is up to HMRC's discretion. Tried calling HMRC to get some clarification on this, but the technical dept always seems busy, so requested a call back twice but to no avail

[MarillionFan]

I have recently started day trading for the past few weeks with 3-5 trades per day on average. I wanted to find out about the tax on my gains.

Do i simply add the total gains/losses or will i have to report each individual gain/loss per trade, to HMRC when i file my annual tax return form?

Will i be paying CGT @18% or will this be classed as income, therefore liable to pay Income Tax?

Any advise will be much appreciated. Thanks

If you trade regularly you will be charged at Income Tax NOT CGT. CGT is based on the risk of holding stocks for more than a month at a time. Day trading which can be a few days is charged at income tax.

How do I know? See my tax return. Horrible.

[DimPrawn]

They will tax you whilst you make a profit and then point you to the spread betting tax free rules when you make a loss and try to offset your other tax burden.

HTH BIDI