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Posted Wed, 16 Feb 2022 01:04:20 GMT by jedi54
Hello During the fiscal year of 2020-2021 I was unemployed and speculated in the stock market. I used a broker in the USA to do hundreds of trades. The huge majority involved trading financial derivatives. With the very odd exception where I traded stocks and I virtually broke even on those. Some trades lasted weeks while others lasted minutes. After doing the math for the whole fiscal year, in which I converted each transaction from USD to GBP using that day's rate, I ended up negative by a couple of thousand pounds. In addition to the above I also bought and sold some crypto currencies in an European exchange for a total profit of about two hundred pounds. During this period I never received any benefits of any kind. Additionally - as I don't know if it changes things - from the Tax Service Gov page I can see it's possible to make voluntary contributions to my pension. And I can do this until 2027. Which is something I'm thinking on doing. My question is: do I need to self-assess? If so then which way should I do it? I never created nor registered any business nor have an UTR, so I guess that rules out option "self-employed or a sole trader". That would imply going with the option "not self-employed" then. Is that correct? If I'm not obligated to do a self-assessment and that is only optional then: are there any advantages or disadvantages in doing so? My understanding is that it would allow me to carry losses to following years. Thank you very much for your help.
Posted Wed, 16 Feb 2022 14:33:22 GMT by HMRC Admin 17

Hi,
 
Please see guidance here on self assessment criteria. Capital gains losses are not necessarily a criteria for a return.

If you are trading in these shares then this would be self employed income:

Self Assessment tax returns   .

Please also see guidance here on losses and notifying us of them in order to carry these forward to later years:

Capital Gains Tax   and :

CG25330 - Remittance basis: losses: introduction  .

General guidance on cryptocurrency can be found here :

Cryptoassets Manual  .

Thank you.
Posted Thu, 17 Feb 2022 12:55:02 GMT by jedi54
Apologies but I'm still confused about a few things. 1) When you say "shares" does that include both shares and financial derivatives? 2) Does trading any amount of shares _or_ financial derivatives, automatically makes one become self-employed? Irrespectively of the fiscal year result being a loss, and independently of the total amount traded? 3) According to the link you provided https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return it says > "self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)" > "But you may need to send one if you have any other untaxed income, such as: [...] income from savings, investments and dividends" At the end of the fiscal year my balance was negative, both for traded shares and for traded financial derivatives. So does that mean I don't have to do self assessment? Or does the term "income" refers to the existence of any singular profitable trade? Independently of the final overall result of the fiscal year, in which losses are accounted for. And by implication I have to do self assessment. 4) On the survey at https://www.gov.uk/check-if-you-need-tax-return it asks > "Did you earn more than £1,000 from working for yourself? This is the amount you earned, including any coronavirus (COVID-19) support payments you received, before taking off any expenses." Similar to my question above. Is this value for the whole year while considering losses as well? Or is it just considering gains? And the other question is not clear either: > "9. Do you need to pay any Capital Gains Tax? You **usually** have to pay ..." What exactly does "usually" mean? How does a yearly negative balance or (even though it doesn't apply to me since I end up negative) the Personal Tax Allowance of £12300 fit here? 5) Regarding foreign losses, you posted a link to remittance basis. I'm confused, shouldn't those still be on arising basis? Once again, thank you very much for the help.
Posted Mon, 21 Feb 2022 11:00:50 GMT by HMRC Admin 19
Hi,

In terms of being self employed, you will need to determine if your trading in shares and financial derivatives is for business or personal use. You can find guidance on this here:

BIM20200 - Meaning of trade: badges of trade: contents

If you meet the badges of trade then any income will be reported as self employed income. If this is a loss and you wish to utilise the loss then you will need to report this through Self Assessment even if your profit is less than £1000.

Relief for trading losses (Self Assessment helpsheet HS227)

If you are not classed as trading then you can report the loss as a capital loss. This does not need to be done through Self Assessment.  

Capital Gains Tax

Thank you.

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