#TaxAdvice #Trading #Spreadbetting #UKBased #TaxStructure #AccountGrowth
Hey fellow traders! 📈💰 I’m looking for some tax advice as I’m on the brink of transitioning to full-time trading, averaging £8,000 per month. Here’s a bit about my situation:
– Trading via spreadbetting for 7 years, consistently profitable for the past 18 months
– Currently employed as a consultant earning £74,000
– Own a rental property with rental income of £1,000
– Planning to buy a new house with my partner in a few years
– Meeting with a tax advisor this Friday, struggling to find the right fit
I’m considering different tax structures like a limited company, sole trader, or self-employed. Any insights on what works best for full-time traders like myself? Looking to maximize profits while staying compliant with HMRC regulations. Would love to hear from experienced traders, accountants, or anyone familiar with this area. Thanks for the help! 🙏
Possible solution:
– Consider operating as a sole trader for flexibility and simplicity in managing taxes, especially with spreadbetting as your main income source. This approach may help you take advantage of tax exemptions, while also allowing you to easily transition to full-time trading. Just ensure you keep detailed records and consult with a tax professional to ensure compliance and optimize your tax strategy.
Spreadbetting is tax free
Spreadingbetting can or can’t be taxable depending on the terms
[https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22020](https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22020)
>What is the best tax structure to operate out of? Limited company?
If your bets are ruled as tax free there are tax rules as a company that apply, so 100% not if your spread betting is judged as tax free.
If it’s classed as taxable, then a ltd company might be the best plan.
Even if spread betting is your main job is has the same tax rules as a side hustle. It comes down to if HMRC thinks your terms are gambling or not. (Since the economic substance is high)
>~~We would like to buy a~~ **~~bugger~~** ~~house in several years time~~
~~Well then~~
Edit: OP has edited the post so the funny bit no longer applies
You would need to consider the Badges of trade. This is when tax free investments can be taxable as a trade and taxable to income tax and class4 and 2 NIC
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205
Wow. I didn’t know spread betting could be that profitable.
Making an extra £500 a month would make a huge difference to my life. I guess I’m gonna have to look into it.
If you have any spare capital lying around after paying that taxes you need to pay, I suggest buying a property on the Isle of Man and then start trading out of there as a limited company. As the tax rules there are advantageous to say the least.
Individual Tax Comparison (Day Trading)
United Kingdom
For individuals, day trading is typically considered as part of trading income, hence subject to income tax rather than capital gains tax.
• Personal Allowance: £12,570
• Taxable Income: £100,000 – £12,570 = £87,430
• Tax Calculation:
• Basic Rate (20% on income up to £50,270): £37,700 * 20% = £7,540
• Higher Rate (40% on income between £50,270 and £150,000): £37,160 * 40% = £14,864
• (No Additional Rate since income is below £150,000)
• Total Tax: £7,540 + £14,864 = £22,404
Isle of Man
• Personal Allowance: £14,500
• Taxable Income: £100,000 – £14,500 = £85,500
• Tax Calculation:
• Basic Rate (10% on first £6,500): £6,500 * 10% = £650
• Higher Rate (20% on remaining £79,000): £79,000 * 20% = £15,800
• Total Tax: £650 + £15,800 = £16,450
Business Tax Comparison (Day Trading)
United Kingdom
• Corporate Tax Rate: 19%
• Tax Calculation:
• £100,000 * 19% = £19,000
• Total Tax: £19,000
Isle of Man
• Corporate Tax Rate: 0%
• Tax Calculation:
• £100,000 * 0% = £0
• Total Tax: £0
Summary
• Individual Tax (Day Trading):
• UK: £22,404
• Isle of Man: £16,450
• Corporate Tax (Day Trading):
• UK: £19,000
• Isle of Man: £0
Hope you find the answers you’re looking for OP.
I trade too (CFDs) but not full time and was looking to transition to spread betting for the tax excemption, but the very same question was on my mind regarding tax if I were to go full time with spread betting.
It’s honestly a grey area. I’ve asked on the HMRC forums a few times, and the answers I get are always very vague. I’ve also searched on online forums and get mixed answers that it is and is not taxable when your main source of income. There’s no definite answer, and it’s frustrating how subjective it is.
The only way to know for sure is to speak to an accountant and reach out to HMRC themselves.
Please let me know if you find answers.