Tax enquires for UK investor

Hi
Would just like a little bit of advise regarding tax. I am based in UK and I began trading on 212 5-6 weeks ago. I have been using the invest side of 212 and my strategy has been two fold. I have been investing for the long term but I have also been buying stocks and then selling them sometimes making couple of pound then re-buying a stock etc. I have done some research on the matter and it’s not very clear if I am liable to pay income tax or whether it goes under capital gains. I have not withdrawn any money from the app and I don’t intend to as I am building up my funds month on month. Also do I need to keep a record of everything I have bought and sold times dates etc or just keep account of the profits I have made.
Thank you I’m advance for reply’s

It is simple to complete your tax return if you can answer No to both of the following questions. If so then you will not have to report anything - though you will have to keep records of your gains in case you are asked.

Did you dispose of chargeable assets worth more than £48,000?

Are your total chargeable gains before deducting losses more than £12,300?

If you cannot answer No to both of these then there is much to keep track of (though dates is enough, not times). Unless HMRC allow you to qualify under special rules as a day trader, all your gains and losses are taxed under the capital gains regime. I recommend reading all the pages that start here: https://www.gov.uk/tax-sell-shares

Also read https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2020#rule

You need to understand the special rules that are set out in point 2. “How to identify the shares disposed of”. When you sell shares you have to figure out the gain against their cost - but that cost may be the cost of shares you bought the same day, in the next 30 days, or on past days. It is important to keep track of the average GBP per share cost price in your so-called Section 104 holding, which is all shares bought in past days.

There is no getting away from the fact that very careful record-keeping is required. I use a Google spreadsheet to keep track, using the information in the History section and of the Trading 212 app (and Results section for CFD). If you invest in USD stocks then you have to keep track of the exchange rates at which GBP <-> USD transactions occur, since all CGT is figured on GBP costs and proceeds.

In the Capital Gains section of a self-assessment tax return there is a subsection called “List share and securities” - this is for your gains/losses from share investment. There is another section called “Other property, assets and gains” - put results from CFD trading here. When they ask for “cost” of a CFD position you can put the margin that was required. For proceeds, put “cost” + “result” from the Trading 212 Results history. You can also deduct the cost of any interest from your gain.

If you keep a neat spreadsheet you can print it as a pdf and attach it to your online self assessment tax return. In the return itself you only need to put the number of transactions, the total proceeds, total gains before losses and total losses.

It would be interesting to know how others keep their records. My method is to have a spreadsheet like this. It shows that I presently have 12 shares of V. The first two purchases were for 2 and 0.5 shares. My current cost per share is £154.60. I have omitted the lines for purchases of the remaining 10.5 shares.

The function GOOGLEFINANCE(“V”) gives me the current share price. The current exchange rate comes from GOOGLEFINANCE(“USDGBP”). I have contiguous lines in a “Diary” sheet for each of the companies or ETFs in which I own shares, and I add new lines as required.

1 Like

Hi Richard thanks for your CG info you seem to be only person on internet that understands it ha.

I’ve read through a lot of your posts but one thing I’m struggling with is…

If I’m a uk forex cfd trader I place 2 trades in a tax year first trade is win of £200 second trade is loss of £100 do I really have to fill out capital gains self assessment form to tell them I made £100 cfd trading gains in a year? I know I won’t be taxed but I would rather not have hassle of forms.

Hi. Use the tool below. You may find that you need not report if you have no capital gains tax to pay and do not meet any other criteria that requires completion of a self assessment return.

Someone who meets the criteria to complete a SA would need to report CG tax losses but should find it trivial to do so.

I am not a tax professional, but I can point you to the information that exists on HMRC’s website where you can find the answers you need. My previous posts are most relevant to those who have sufficient self employment, property, interest, dividend and CG income outside an ISA that they meet the criteria to complete an annual self assessment return.

Cheers. I’m a self employed electrician so my accountant does my SA but he doesn’t seem to know much about trading capital gains.

I’m hoping I don’t have to fill the CG of SA part in because I’m not sure if when I need to get a mortgage in future if a lender who sees my accounts and that I traded few forex CFD’s will hold that against me like they do gamblers. I’ve spoken to a mortgage advisor about that and he seemed puddled by that question too. So trying to find people in the same shoes as me.

I appreciate your thoughts mate. Will have a look through gig website link

See here. Relevant to you is:

You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if both of the following apply:

  • the total amount you sold the assets for was more than 4 times your allowance
  • you’re registered for Self Assessment

You are registered for self assessment because you are self-employed. So it is a question of whether or not the first bullet point applies to you. However, the tax return only shows summary figures. If a mortgage lender were to ask to see you tax return, which I doubt they do, there would be nothing to identify that the capital gains were from fx trades.

Last time I got a mortgage they drilled deep through finances they wanted tax return and another form from hmrc to say how much tax I paid can’t remember code of document. I think mortgage lenders are being really strict lately.

With regards to selling 4x the amount that’s where I get confused because I’m just cfd trading speculation on foreign currency I don’t actually have the currency at home and I use margin.

And I only make a profit over the year if my winning trades are greater in money value than my losing trades so I could have a year where I have 2 trades first trade loses £200 and second trade wins £100 surely they wouldn’t want me to fill in capital gains part of SA If year was £100 loss.

Just reread your above post when you say 4x allowance that’s about 48k isn’t it if allowance is about 12k so is that saying I don’t have to report on CG part of SA if my combined winning trades over year without losing trades deducted is not above 48k? That would be a lot simpler

The allowance is 12,300 so 4 x that is 49,200.

As I understand it, this means you do not report if sum of all transaction values in the year is less than that. Example

Buy £10000 worth CFD at 5 x leverage. Transaction amount is £2000. Sell means another £2000. At this point you are £4000 on the way to that £49200 threshold. It depends on transaction amounts, not the amounts of profit and loss. That is definately the way it works for share transactions. For CFDs the value of a transaction is considered to be the margin put up to make the purchase or margin released at a sale.

Yes, if your the total value of transactions exceeds 49,200 then HMRC want to see details even if you make an overall loss. At that level of trading you are no longer a small fish and they reasonably want to know what was involved.

However, you do not need to declare a loss in the same year it was incurred. You can delay up to 4 years. If I had a 20000 gain and 20100 loss then I would declare the gain and 7700 of loss for a net gain of 12300, exactly at the tax free limit. I would not declare 12400 of loss, but rather save that up to declare and offset against gains in one of the next 4 yeara.

Hmm thinking I’m getting it…so when I open a cfd currency trade technically I’m
Buying currency or the broker is and I’m just buying the margin of that currency purchase and when I close the trade I’m selling currency back so I do 2 deals in one trade that all adds to towards my £49200?

The leverage I use is 100 to 1 so that helps me keep below threshold hopefully.

If all is correct above my main problem now is in reality I do about 20 trades a week over course of the year this will be a major headache to try work out all my margin values of each trade the broker report I get at end of month doesn’t say on it the actual value of the trade I took it just tells me my leverage ratio and how much available margin I have at that time with regards to my account balance and at what price the currency was at when purchasing.

Crikey it really is a nightmare to work that out haha.