Capital gains tax

Let’s assume that I will start making some profits on cfd, so as long I don’t have gains over 12k I don’t have to bother about anything? Rest of my investments are on ISA so I don’t care about taxes from this side at all

As long as you don’t go over 12300 pounds during this tax year and your total sales are under 49200 pounds. (in your case it will be the number based on the margin used).

as far as I understood… @Richard.W is the master.

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Irrespective of whether or not you make profits of over £12,300, you are supposed to complete the CG section of self assessment if sale proceeds are over £48,000 (2019-20) or if you have losses to deduct from your gains. So unless you are an amazing trader I guess you will have losses. For a CFD the proceeds would be your opening margin plus result.

Disclaimer: I am not a UK tax accountant. All I can tell you is that I have studied the HMRC website information and am experienced completing the online self assessment CG section for many years. I recommend reading the HMRC pages yourself and registering for self assessment so you can play with the online reporting tool.

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Would be cool if HMRC introduced a PAYT (Pay as you trade)… so retail investors could go just on Invest accounts too if they feel like it… without thinking is a headache of taxes if you trade frequently.

is it 48000 or 49200 ? I thought it was 4x 12300 ? @Richard.W

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I’m sure they would love to do this! Stamp duty already does it partially. The practical problem is that tax rates depend on your other income and there are allowances to be figured in. CG tax is particularly tricky as no platform can know that this is the only place you hold stock in a company, so its impossible to figure your gain without knowing the total picture.

That’s probably right. Let me check and post back here.

Yes, £48,000 was the threshold in 2019-20 when tax free allowance was £12,000. In 2020-21 it will be £12,300, so threshold will be £49,200.

This is in the Trust section. But I would expect it to be the same for individuals.

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I also had a look on the HMRC website yesterday and could not find the sales proceed reporting requirement (4x capital gains allowance or annual exemption), but I found another website online that did mention it in a nice flowchart:
https://www.rossmartin.co.uk/private-client-a-estate-planning/capital-gains-tax/3350-reporting-capital-gains

So even if I made 49 k worth of trades but my gains won’t exceed 12.3k I’m still not obligated to pay any tax on those just fill self assessment form? Am I understanding correctly?

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Yes. That’s correct. But read about it yourself here:

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Great reading folks. One question, is it an amalgamation of all your trading accounts or per single account?

Example:

£38k made in CFD
£15k in Invest
£20k in ISA

Combined total is £73k but earnings made in separate locations

ISA is tax free so does not count. But CFD and Invest are to be amalgamated. They are both reported in the capital gains section of the tax return. Losses on CFD can be offset against gains in shares and visa versa.

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That would be an absolute disaster. So many people would end up doing paper work claiming tax based against losses. The government would end up paying out constantly which would disrupt their cashflow further.

Also, capital gains is a tax on profit and not a tax on the underlying asset. You’re thinking of a tax like VAT.

Think of it though - your salary is already being taxed. You’ve paid your due. Do you want to pay a second time via a tax when you’re purchasing shares? I don’t. It sounds like you guys in the UK have a 12.3k tax free allowance for capital gains too which wouldn’t exist using the system you proposed. At best with your system, at the end of the year you’d have to report your profit and loss to avail of the allowance, which circles back to my very first sentence. It would disrupt government cashflow.

The way it is not means less tax for you, less disruption to your cash flow/balance, less disruption to the governments cash flow/balance, and the ability to use a capital gains tax allowance.

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Do we have to claim it on crypto’s? Pretty sure we don’t. Gold is also not taxed so, if your investing in gold you don’t pay on it

Also, if your set up as a company you can avoid the whole nasty side of taxes and pay lower taxes

In the UK, yes, tax is due on gains from crypto. In it only gold coins or bars that does not incur tax. A gold ETF would be taxable.
. https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

If you havnt cashed in though they can’t tax you surely?

This is explained in the link above.

Individuals need to calculate their gain or loss when they dispose of their cryptoassets to find out whether they need to pay Capital Gains Tax. A ‘disposal’ is a broad concept and includes:

  • selling cryptoassets for money
  • exchanging cryptoassets for a different type of cryptoasset
  • using cryptoassets to pay for goods or services
  • giving away cryptoassets to another person

Hi @Richard.W.

Can I ask if you could help with these two doubts I have:

A. Say my total sells for 2020 are going over 49K in March 2021. How do I report them using the Self assessment online ? I read deadline for that is 31 Jan 2021.

B. Do you use the SA100 form to report your gains ? If so do you have a simple example for someone employed with less gains than CGT allowance but more sells than 49K ?

Sorry just paranoid I’m going over before the end of the tax year…

Thanks!!

Hi. Self assessment is very easy using the HMRC online tools and reporting. I don’t know how old you are. Hopefully, you will gain enough wealth that you will be needing to complete a self assessment tax return most years of your life - so you may as well get started. Just register for self assessment on the HMRC website. Don’t both with the paper SA100. Do it all on line. If you are smart enough to handle investing, then tax reporting should be something you can do too.

The tax year ends 5 April, and you then have until 31 January of the following year to complete your return and pay any tax due. If you have salary income you will put that in the tax return, and also any bank interest and share dividends. When you come to the Capital Gains section it walks you through it with some questions. You will have to give the amount of your gains before losses, and then losses. The online tool walks you through every step, so it is really quite easy.

Remember that you want to maximise use of the £12,300 CG allowance. Suppose you have gains of £40,000 and losses of £30,000. You are not required to report your losses in the year they are incurred. You can delay up to 4 years. So in this case you would want to report only £27,700 of the losses, so that the net gain comes to £12,300. You can save the remaining £2,300 to offset gains in future years.

You just need to keep good records of each gain or loss, your dividends received, and US withholding tax that was deducted. (Maybe you are not yet in the position of having more than £2000 pa of dividend income, but that will hopefully come.)

If you have capital gains or dividends in the year to April 5, 2020, then I suggest you register now, then start completing the form for 2019-20. You can learn how it work. You don’t have to submit until end January 2021.

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I see. So for the 20-21 tax year I have to report within 31.01.2022

Is there any “demo” page of the online self assessment ? Would be cool to try it out.

What’s the worst that can happen if I didn’t go over the CGT allowance but failed to report total sales over 49.2K ?