stockstunna

I've deduced that the way I trade CFDs complies with the 9 badges of trade therefore it would be more appropriate for me to pay income tax rather than CGT, as I would be deemed a "trader" rather than "investor". I intend to set up as a sole trader for privacy reasons, but upon doing research, I understand one has to pay "payment on account" after their first year. The issue that I have with this is that I intend to compound my trading account every year, from April-April, making only 1 withdrawal per year at the end of the financial year, so taking money out mid cycle would disrupt my whole business model and perhaps even cause it to collapse. I understand that one can remove/reduce "payments on account" when doing their self-assessment, and I was wondering if in my situation (compounding CFDs) is is a credible reason to enter £0, as my business model could fail otherwise? and can I do this every year? (I'd obviously earn more than £1000 per year but would need to put £0 down as the money in my trading broker fluctuates throughout the year and is only 'realised' when I make a withdrawal). Any confirmation would be greatly appreciated.

Thank you for responding. So far, from your responses I have gathered: - That the individual themselves have to deem themself a 'trader' or 'investor' and decide themselves whether they should be subject to income tax or CGT. When you say: "We can only give you advice to allow you to make the decision yourself" Please can you provide weblinks to all of the relevant HMRC guidance pages specific to CFD trading, so that I can do my own research and come to my own conclusions. Kind regards,

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?

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,