ISA is the way forward, guys. Saves you the trouble and scratching your head. Learned the hard way.
@Richard.W I have a question if you don’t mind or anyone that knows the answer. So supposing I sell some of my assets to pay for CGT. Will I have to pay CGT on the assets I’ve sold in the next tax year. It would be like double taxation wouldn’t it?
Yes. You will have to pay CGT on anything you sell, irrespective of how you use the proceeds, even if to pay CGT on other assets.
If the Chancellor were to someday introduce a wealth tax then people would have to pay CGT on assets they sell to pay the wealth tax.
Ah I see. Thanks for the prompt reply.
The only way to sell and not owe CGT is if sale takes place in ISA, or is under the annual allowance, or can be offset by losses, or you have donated the shares to charity and they have asked you to sell them on their behalf.
I have an ISA account and that’s what I’ll use mainly in future. I just started investing last June so I’m newish to this. I have some savings for a deposit on a house so as I’d used up my ISA allowance most of my trading has been done in the invest account which is where my deposit is. Not been able to able to withdraw from your T212 ISA and replace has limited what I can do. Hopefully this coming financial year will be ok as I won’t be trading much with the invest, not to the same level anyway.
Can someone advise on this scenario.
Im trading cfd forex. I’ve invested 12k as my deposit. If in the tax year I double my profits and make 12k profit I have no cgt to pay and no need to declare it as I’m 4x below the reporting limit to hmrc.
Now In the next tax year if I withdraw the 12k profit I made and repeat the process say for eg withdrawing 12k every year from the profit made, and always leaving the original 12k i deposited I never need to report to hmrc. Is this correct?
if you only ever collect £12k in profits and never trade the £49.2k in a tax year then yes, you won’t need to pay taxes on the money or fill out a tax declaration to HMRC. However, CGT rules can change at any time in the future so it is best to keep on top of the news to avoid getting caught out once it does.
If you make more then £12.3k in a year, you can offset the amount that’s above the tax allowance with any unreported losses from the last 4 years and that will bring it back down to the tax-free bracket.
Does anyone know how the free shares Trading 212 give for referrals are treated in terms of UK capital gains tax?
I’m wondering how I need to input these into a spreadsheet, i.e. list the share price but have the cost to me at £0, and if it’s a UK stock with STAMP DUTY RESERVE TAX paid, should I list that even though it wasn’t actually me who paid it, yet I’d then be deducting it when reporting. Thank you.
Interesting question. Energy company referral fees pose a similar question. Read here for a discussion
An energy supplier’s ‘refer-a-friend’ scheme offers an existing customer a £50 account credit if someone switches to that supplier by way of the existing customer’s personal referral link. Is this referral income taxable?
It may be that you can treat the free share as a cash gift, which you have subsequently used to buy a share. Gifts are not taxable to the recipient. If this is correct, then the full cost can be deducted from sale proceeds when computing capital gains tax liability at some future point of sale. But one could also argue that you have been paid to encourage someone to signup, and that this is therefore income. However, miscellaneous income less than £1000 in the year is not taxable:
miscellaneous income from casual earnings, commission and freelance income that’s not from employment or self-employment. From 6 April 2017 receipts from self-employment and miscellaneous income of £1,000 or less are exempt from tax and don’t need to be reported on a tax return
HMRC will probably look at circumstances. Those who seek to obtain many free shares, say through encouraging others to use their link which they advertise on a YouTube channel, may be in the position of running a business and should declare the purchase value of the free shares as taxable income.
The person who signs up and receives a free share is different than the one who made the referral. For the former person the free share could be reasonably seen as a discount against future charges.
Another thing to consider is that because the value of the free share is not a guaranteed set amount there is an element of lottery. Lottery winnings are not taxable.
It is a grey area. But there are precedents for nearly similar things. Bank account cash backs are not taxable. Energy company switching bonuses are not taxable as they are considered a discount on future charges. Cashback from sites such as Quidco are not taxable.
Thank you Richard, all fantastic points and gives me a lot to think on.
Starting to build the painful XLS on my day off
I have a question about FX fees and right issues(corporate action).
Do I need to include the FX fees when calculating P/L for each position closed ? Is a bit confusing, so checking I’m doing the right thing.
I received some cash from my broker as part of “Corporate action”… I guess that has a £3000 allowance that I saw reported here ? Capital Gains Tax: share reorganisation, takeover or merger - GOV.UK
Ok, what makes sense to me is to record each buy and sell without FX fees. As FX fees to buy US shares for instance are taken before buying and after selling, as that is where the currency conversion happen… so there’s no point to include them otherwise they’ll alter the P/L…
Takes this example:
18/08/2020 FX_FEE 7 GBP fx fee taken for 51.3855643 Western Digital Corp (US9581021055) on 18-Aug-2020 14:11:03 GBP CASH_OUT -7 18/08/2020 SELL 51.3855643 Western Digital Corp (US9581021055) @ USD 39 (@ 1 GBP = 1.31090 USD) on 18-Aug-2020 GBP CASH_IN 1528.748957 11/08/2020 BUY 51.3855643 Western Digital Corp (US9581021055) @ USD 38.10000 (@ 1 GBP = 1.31090 USD) on 11-Aug-2020 13:49:40 (Requested 1500 GBP) GBP CASH_OUT -1493.47 11/08/2020 FX_FEE 6.72 GBP fx fee taken for 51.3855643 Western Digital Corp (US9581021055) on 11-Aug-2020 13:49:40 GBP CASH_OUT -6.72
How would you calculate the P/L ? Just SELL - BUY ? or SELL - BUY - (SUM of FX FEEs ?)
Also just to add to the question, when it comes to stamp duty deduction I guess the following applies:
P/L = Total SELL - Total BUY - Stamp duty.
Hey @dropbrick ,
The FX fee does not affect the position result as they are already included when you Buy & Sell the shares. You may see the applied FX fee formula along with an example in the article here.
Edit: FX Fee do not apply for payments arising from corporate events.
As for the Stamp Duty tax, 0.5 % is applied on share purchase on the LSE and it is deducted from the final result (Profit/Loss).
I thought that was not the policy. See here:
Which is correct?
Strictly speaking, for UK investors, HMRC does not allow fx costs as a deductible expense against taxable profits. Only brokers fees are deductible. It is unclear whether the.0.15% is a true fx cost or actually a disguised broker fee. It would reduce my taxes if it could indeed be classed as a broker fee. We know that Trading 212 makes a profit on the fx. Fair enough, but that makes it a broker fee, surely?
My knowledge about the treatment of FX cost is based on several conversations about this with HMRC in regard to similar fx charges made by other brokers. I imagine there are tax professionals amongst the community who can also verify this.
Noted @Richard.W, my bad. We’ve recently removed the 0.15% fee for corporate events and it is indeed no longer applicable. I’ll edit my initial comment, thanks for pointing this out.
As for the second topic - I’ll update you later on.
It may help if I share a recent conversation with HMRC. My query was with regard to charges made by AJ Bell.
Perhaps someone else would like to try a similar query and see what HMRC say. Perhaps phrase the question slightly differently so that it captures what happens with Trading 212. Note that my query was phrased in a way to give HMRC the opportunity to tell me that the fx charge could be treated as a deductible broker fee. They did not bite.
HMRC are very responsive to question sent to them via Facebook messenger.