UK Tax

UK tax questions? Ask a UK tax advisor for answers ASAP

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

Hi, I work as a day trader from home trading forex full time…

Hi, I work as a...
Hi, I work as a day trader from home trading forex full time as my only source of income. How do I structure myself to pay the least possible tax? I am based in the UK.
Show More
Show Less
Ask Your Own UK Tax Question
Answered in 3 minutes by:
10/4/2010
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15,984
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Verified
Hi.

Can you tell me how you trade forex. Do you use a spread betting account or a retail forex broker? How much money do you make in a year?
Ask Your Own UK Tax Question
Customer reply replied 7 years ago
Hi Tony.

I trade using a retail forex broker.

I have only just gone full time so can't tell you how much I make in a year. However, I anticipate making approx £75k - £150k in my first year at a very rough guess.
Thanks.

If you trade as a sole trader, the first £6,475 of your profit in 2010/11 will be tax free, the next £37,400 will be taxable at 20%, the next £106,125 will be taxed at 40% and anything over £150,000 will be taxed at 50%. You'll pay Class 4 NIC at 8% on profits between £5,715 and £43,875 and at 1% on profits above that. If you choose this route you need to register as self-employed within three months of starting out or face a £100 fine. You can register as self-employed here.

If you trade through a limited company, profits up to £300,000 will be taxed at 21%, the small companies rate of corporation tax. Any money you draw as salary will need to be subjected to income tax and national insurance contributions through a PAYE scheme as you will be an employee/director of the company. As well as income tax (above the personal allowance of £6,475) you will pay employees national insurance contributions at 11% on earnings above £5,720 per annum up to £43,875 and at 1% above that level and the company will have an employer's national insurance contributions liability at 12.8% on the salary it pays you in excess of £5,720 per annum. The salary and employer's nic are tax deductible expenses for the company.

You can withdraw profits in the form of a dividend which is treated as basic rate tax paid so if you drew nothing but dividend you could take out £39,487.50 net (£43,875 gross) and have no further personal tax to pay. above that level, dividends are taxed at 32.5% less the 10% tax credit and over £150,000 at 42.5% less the 10% tax credit. Dividends aren't subject to national insurance contributions. The dividend carries a notional 10% tax credit but none of this is repayable. The dividend is not a tax deductible expense for the company. It is paid out of after tax profits.

Many people starting out in business for the first time choose to use the sole trader route initially as setting up a company and complying with the red tape that comes with it can be time consuming and expensive if you use an accountant. You can always incorporate your business into a limited company later on.

You might find the website here useful.

Let me know if you have any queries.

Edited by Tony on 10/4/2010 at 7:29 PM EST
Ask Your Own UK Tax Question
Customer reply replied 7 years ago
Thank you for your answer.

If I go the sole trader route, how do I pay the tax? Do I have to fill out a tax return and how frequent is this?

Thank you for the website link as well.

Hi again.

You need to register as self-employed. You'll receive a tax return after the end of the tax year on 5 April 2011. The tax payable for 2010/11 will need to be settled by 31 January 2012. If your liability is over £1,000, you will need to make payments on account for 2011/12 on 31 January 2012 and 31 July 2012, each one equal to your 2010/11 liability. If you think your liability for that year will be less you can apply to have the payments on account reduced. Any further tax payable for 2011/12 will be payable on 31 January 2013, together with the first payment on account for 2012/13. And so it goes on. You receive one tax return per year.

If you choose the self-employed route, I'd draw your accounts up to 5 April to coincide with the end of the tax year. It will make life easier.

Edited by Tony on 10/4/2010 at 7:51 PM EST
Ask Your Own UK Tax Question
Customer reply replied 7 years ago
OK great and just last few questions... What records do I need to keep? As I am a trader, will I need to show profit/loss statements from my broker? Bank statements?

I will be drawing profits from my trading account to my bank account every month, are there any restrictions on how much money as am able to use as income?
Hi again.

Keep trading statements, bank statements and any other paperwork related to the business including expenses receipts.

I'm not sure what you mean by "restrictions on how much money as am able to use as income". As a sole trader, you will be taxed on your profit regardless of whether you draw it out of your trading account or not.
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15,984
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Verified
Tony Tax and 87 other UK Tax Specialists are ready to help you
Ask your own question now
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with an uk tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Tony Tax Your Own Question
Tony Tax
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15,984
15,984 Satisfied Customers
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.

Tony Tax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Sam

Sam

Accountant

6,546 satisfied customers

26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax

bigduckontax

bigduckontax

Accountant

931 satisfied customers

FCCA FCMA CGMA ACIS

TEAP007

TEAP007

Tax Preparer

759 satisfied customers

Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years

Andrew Baker(baktax)

Andrew Baker(baktax)

Personal Tax Adviser

756 satisfied customers

35+ years experience in income tax, CGT, non-residence

berduchwal

berduchwal

Accountant

669 satisfied customers

Qualified accountant and bookkeeper running my own practice since 2008.

Clare

Clare

Solicitor

148 satisfied customers

25 years exeperience as a high street solcitor

Mrs-Tax

Mrs-Tax

Tax Adviser

59 satisfied customers

Law Degree, 19 years in UK Tax.

< Previous | Next >

Related UK Tax Questions
I am from the UK but have been working abroad for the last 7
I am from the UK but have been working abroad for the last 7 years full time and the country where I resides does not charge tax on any income. I therefore do not need to pay tax in the UK.However, if… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,546 satisfied customers
I need advice on uk tax for trading forex. Do you deal with
HI there. I need advice on uk tax for trading forex. Do you deal with UK tax? … read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
931 satisfied customers
I am a New Zealand Citizen that has been living and working
Hi There, I am a New Zealand Citizen that has been living and working in Hong Kong for 15 years, I am a permanent resident of Hong Kong. Recently lost my job and I am going to fund my Forex account an… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
931 satisfied customers
Soon I will be opening a forex trading account with the
Hello, Soon I will be opening a forex trading account with the intention of leaving my full time job (if all goes well) and do day trading full time. What do I need to do in order to pay any taxes whi… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
931 satisfied customers
I am from India, a non UK citizen, but UK resident & I
Hi, I am from India, a non UK citizen, but UK resident & I have 1 year work visa. I'm working full time and planning to invest in the forex market in a company located in UK. With my UK bank account d… read more
bigduckontax
bigduckontax
Accountant
FCCA FCMA CGMA ACIS
931 satisfied customers
What tax implications if any are there if I started making
What tax implications if any are there if I started making income via forex trading living in Sweden and having a trading account in UK… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
How to I input the capital gains losses I have incurred from
How to I input the capital gains losses I have incurred from Forex trading in my Self Assessment?… read more
SoftwareVince
SoftwareVince
Senior Accountant
Master's Degree
25 satisfied customers
Hi, I am employed full time and pay tax. At the moment I am
Hi, I am employed full time and pay tax. At the moment I am trading in spot forex not spread betting. Is forex trading liable for capital gains tax or something else. And how would I go about declarin… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
I have invested in a managed futures strategy through a firm
I have invested in a managed futures strategy through a firm of FSA regulated stockbrokers which trades in derivatives contracts (Equity futures, specifically Eurostoxx 50 and S & P 500 minis). The st… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
I have a friend who is unemployed and has no other income apart
I have a friend who is unemployed and has no other income apart from his investments in forex managed accounts and automated signals/systems (not spread betting). If he makes £70k this tax year, for e… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
I am a British citizen living in Hungary. Currently I pay all
I am a British citizen living in Hungary. Currently I pay all social and personal taxes to Hungary. My aim is to do IT consultancy in the UK on short term contracts but still spend the majority of the… read more
Andrew Baker(baktax)
Andrew Baker(baktax)
Personal Tax Adviser
High School or GED
756 satisfied customers
I am a full-time trader in the forex market working from home.
I am a full-time trader in the forex market working from home. I trade regularly and often. I'm having trouble convincing MHIT that I am carrying out a trade for tax purposes. I'm keen to offset my ex… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
Hello, I am a UK based consultant - mainly working overseas
Hello, I am a UK based consultant - mainly working overseas for past 10 years on contract to UK companies, leading EU project teams. I've been paying UK as a sole trader - and VAT. Since March this ye… read more
Andrew Baker(baktax)
Andrew Baker(baktax)
Personal Tax Adviser
High School or GED
756 satisfied customers
Hi, I wonder if you could help me. I am setting up a business
Hi, I wonder if you could help me. I am setting up a business this week and need to know if Ltd or sole trader might suit me best regarding tax efficiency. The business will be a UK residential proper… read more
Julie Kingham
Julie Kingham
Director
Chartered Tax Adviser
733 satisfied customers
Hi I am a South African (RSA) resident who wants to trade
Hi I am a South African (RSA) resident who wants to trade "over-the-counter"(OTC) spot forex online through a UK broker. I've been told that I would most likely pay income tax not capital gains becaus… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
I am a student in my second year of university. I am a UK citizen
I am a student in my second year of university. I am a UK citizen only. I have a forex account (based with a US broker) worth £96,000. I do NOT spreadbet. I have no job but I trade throughout the year… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
HI, I am self employed consultant and moved to Tenerife in
HI, I am self employed consultant and moved to Tenerife in December. I will be living in Tenerife indefinately. I will be continuing consultancy with the companies i have contracts with in the UK. I h… read more
Julie Kingham
Julie Kingham
Director
Chartered Tax Adviser
733 satisfied customers
In the UK what tax bracket does forex trading - well forex
In the UK what tax bracket does forex trading - well forex monies made fall into - threshold before tax etc. and how much is paid in tax over a threshold if there is one - thanks… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
15,984 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x