Tax on trading CFDs

Dear Admin, I am struggling to fill the disposal proceed and cost in the gain/loss in the "Other property, assets and gains", it has to . Since trading in CFD does not buy/Sell the actual asset but only trade the contract difference which has only profit or loss at the end, I am not able to ascertain the disposal proceed and cost . I have asked my platform for this information. Howevere, they have only given each transaction with following information: Instrument; Currency; Quantity; Direction; Average Price (BASE)¹; Closed Time; Sale Price (BASE); Result (GBP) Base Currency is generally USD normally for all transaction. Thus it is impossible to work out the BUY and SELL price since not provided by patform. Can you kindly advise how to ascertain the disposal proceed and cost please ? Thanks.

Hi N Mittal

Please have a look at CG56100 give advice on calculating the gain/loss with an example at CG56101, to help calculate gains/losses.  Gains/losses will be declared in the 'listed shares and securities' section of the tax return.  Boxes 23 to 30 on SA108.

Thank you

Hi HMRC, I read online about CFD trading. There are different answers I got, Hence want to clarify this here. The profits from CFD trading in stocks, Currencies and Commodities attract Capital Gains tax or Income Tax and NI contributions. Read somewhere that Trading attracts IT and NI whereas investing attracts CGT? I am confused. Please help

Hi Vipendra Singh,
The term contract for differences (often abbreviated to CFD) is defined as a contract, the purpose or pretended purpose of which, is to make a profit or avoid a loss by reference to fluctuations, in the value or price of property referred to in the contract, or an index or other factor designated in the contract.
CG56100 give advice on calculating the gain / loss with an example at CG56101.
CG56100 - Futures: financial futures: contracts for differences
Gains / losses will be declared in the 'listed shares and securities' section of the tax return.
Boxes 23 to 30 on SA108. 
Thank you. 

 

Hi HMRC I have recently started trading gold on CFD. I have a small trading account so I expect my annual profit not to exceed $1000, however, at the end of the year, I would like to become a strategy provider. It means that other traders will have the possibility to copy my trading positions. I would receive then 30% of each profitable position they would've opened from coping my activities. My question is: would that 30 % performance fee be subject to capital gains or income tax?

Hi WeronikaVV,
Presuming that the performance fee is the same as receiving commission in this case, if so, please refer  to
CG56000P - Capital Gains Manual: Shares and Securities: Futures: contents
Onwards, particularly
CG56004 - Futures: income or CG: CG treatment
&
CG56100 - Futures: financial futures: contracts for differences
Thank you. 

 

Dear HMRC Agent 25 I’ve read all articles you quoted and there is no answer to my question…

Hi,
Presuming that the performance fee is the same as receiving commission in this case, if so, please refer  to:
CG56000P - Capital Gains Manual: Shares and Securities: Futures: contents 
Futures: contents HMRC Manual onwards, particularly:
CG56004 - Futures: income or CG: CG treatment
& CG56100 - Futures: financial futures: contracts for differences
Thank you.

Hi, Can you please tell the requirements needed to be liable for upper and lower bracket for Capital Gain Tax. And may I know how i can report this

Hi,

To calculate a capital gains liability, you first have to calculate the income tax liability. If all of the basic rate band of income tax is used up in the income tax calculation, there is nothing left of the basic rate band to allocate to the lower rate capital gains calculation. If there is an amout of the basic rate band not used in the income tax calculation, then this amount of unused BR band can be utilised against capital gains, by being applied to the lower rate band.  
For residential property and land the lower rate is 18% and the upper rate 28%.
For other types of capital gain, the lower rate is 10% and the upper rate 20%.  
There is a calculator below, which can be used to calculate the capital gain arising from a disposal of UK property and land.  

Tax when you sell property

You can save a copy of the calculation to your computer and move to the next screen to create a capital gains account at:

Report and pay your Capital Gains Tax

You can use this account to report and pay your capital gains tax from residential property and land. You should do so within 60 days of the completion date to avoid late penalties.  
If you have disposed of other kinds of assets, such as personal possessions you can report and pay the capital gains tax at:

Capital Gains Tax on personal possessions

Report and pay your Capital Gains Tax

Thank you.

If an AI BOT is used in FX trading when does a taxable profit occur if the cash is not realised from a broker ? To renter the market cash investment is required to form the activity, can capital be returned prior to tax being paid.

Hi,
Please refer to:
CFM50380 and associated links
Thankyou.

Hello everyone on the forum, I have one very important question. I'm starting to trade this month and I wanted to know whether I have to settle these CFD contracts in any way or whether they will simply be added to my source of income because I am officially employed full time. I just wanted to point out that my income does not exceed 20% tax and from trading I'm not sure if I'll have any income at all That's why I'm wondering if I have to report it anywhere because maybe I'll earn 2000-5000£ or nothing...

Hi Rafal GORECZNY

Gains arising from Contract For Difference (CFDs) are subject to Capital Gains Tax.  
Gains / losses will be declared in the 'listed shares and securities' section of the self assessment tax return.  Boxes 23 to 30 on SA108.  
Have a look at CFM50380 - Derivative contracts: relevant contracts: contracts for differences for more information.

Thank you

If I may ask what are the laws on me making a trading account and my son manages it but I will take acceptability on every trade he does, is that fine

Also I’m wondering what tax I would likely have to pay since I earn £15k per year from my main job in person and I’m made £5k this year from trading. And I make about 10 trades a day. So what tax would I have to pay?

Hi there, I understand that you have to pay capital gains tax via a self assessment for any actualised CFD profits. I have a few questions for if a day trader has a full time job & day trades CFDs as a side hustle and is profitable. 1. If a day trader makes more money annually from his CFD profits than his full time job, does he have to pay income tax, or will it remain just capital gains tax even if the CFD profits are disproportionally higher than their full time salary? 2. If one trades with a CFD broker abroad, and is just compounding their trading account, do they only have to pay capital gains tax once they have withdrawn the funds into their UK bank account, or do they have to withdraw profits in full just before the end of each financial year and pay taxes yearly? 3. If a trader is successful at trading CFDs and decides to leave his full time job just to trade CFDs full time, does he have to just pay CGT or would he become subject to income tax as it would be his only and sole source of income? Kind regards,

Hi peterolorunnisola,
Please refer to:
CG56105 - Futures: financial futures: financial spread betting
BIM22015 - Meaning of trade: exceptions and alternatives: betting and gambling - introduction 
As this determines which type of tax you pay.
For the laws on trading you would need to check with the financial conduct authority.
Thank you. 

Hi stockstunna,
There is no definition to determine if you are a day trader or a private investor. Are you investing in the stock exchange to make a living or as a side hustle as you put it? Are you buying stocks and shares and holding on to them in the long term? Each case would be considered based on the facts and circumstances of the case.  
You will have to decide whether you are trading as a business or a private investor. If you deem yourself to be a private investor, then gains would be taxed as capital gains and not as income.  
It does not matter the amount of money involved or whether more than your employment earnings.
Thank you.

Thank for your response. Ok, I will provide more specifics for you to help me decide what taxation would be most appropriate, CGT vs Income tax. I am trading CFD's via a CFD broker that is based abroad. I will be trading the instrument GER40, on a daily basis, not as randomised trades, but as part of a systematic trading strategy that incorporates technical & fundamental analysis. I would be taking 2-3 trades per week, and each trade on average would be held for a matter of minutes to hours, but never overnight. I am not a professional trader by background, but I'm self-learning and getting more profitable as I progress in my learning and application of day trading CFDs. I am trying to distinguish the point at where paying income tax would be most appropriate as opposed to CGT, as the aim would be to initially generate another income stream whilst working in a full-time job whilst improving at day trading, but then eventually leave the job to do trading full time once skilled up and consistently earning enough. So hopefully this can help provide you with an insight to what is the most compliant way to approach taxation, and I would like to know what your recommendations are?