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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Do I have to set up as selfemployed before starting Forex

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Do I have to set up as selfemployed before starting Forex trading in UK?


Some people do register as self-employed financial traders and declare their profits/losses as trading income/losses. Some don't and declare their profits/losses as capital gains/losses. There are stories in the tax world that if your profits from trading make up the bulk of your income, you should register as self-employed but I have never heard of the tax office enforcing this approach. That;s not say it doesn't happen though. My own view is that HMRC won't make a policy decision that an individual trading semi or full time who has other sources of income such as pensions for example should be subjected to income tax on their trading profits for fear of receiving claims for tax relief from all those "traders" who lose money trading foreign currencies etc..

Take a look here for a leading tax case on this subject from 1965. Obviously, things have changed much since then but HMRC has yet to take a definitive stance as to whether profits from any type of financial trading (excluding spread betting) should be taxed as income or capital gains. For the moment at least, it would appear that you can choose how to be taxed.

Capital gains are taxed at 18%, 28% or a combination of the two rates depending on the level of your income in the same tax year. Income Tax is charged at 20%, 40% and 45%. Class 4 NIC is charged at 9% on annual profits between £7,755 and £41,450 and at 2% on the excess.

You might find some useful information from the website here. I know several traders who are members but they say there is no definitive answer in the members' area on whether profits should be dislcosed as income or capital gains.


If you want to go the self-employed route, you should register as such within three months of starting out which you can do online here. If not, all you need to do is disclose your and losses at the end of the tax year. You can read about registering for self-assessment here.

I hope this helps but let me know if you have any further questions.

Customer: replied 4 years ago.

So basicly it is my choice to set up as self emplyer or not? From what you have said it looks like that not setting up for self emplyment is better choice for me. Does it matter how many trades and how offten I will make?

It's only your choice because the tax office have no formal policy that I am aware. As of now, it doesn't appear to make any difference but I stand to be corrected.

If you do register as self-employed and don't incur much in the way of expenses and you make money, you will probably pay more in income tax and national insurance contributions than you would in capital gains tax. If you disclosed your profits as capital gains instead, it may be that in future tax years the tax office challenge the way you have declared your profits and seek to tax them as income which could leave you with a sizeable tax and nic bill for several tax years. I know of people who disclose their profits as capital gains and those who disclose them as self-employed profits.
Customer: replied 4 years ago.

So both ways in the end of the tax year what I need to do is fill self assestment tax form?

That's correct.

Even if you make capital losses, you have to claim them within four years of the end of the tax year in order to be able to use them against gains you may make in future tax years.
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