My understanding that is UK trading is free of tax for all, however, if this was your full time job surely Mr Taxman would like to take some money from you somehow?
Unfortunately you are incorrect with regard to the tax situation in Britain. Trading is not tax free in the United Kingdom. However there is a loophole within the betting and gaming industry that profits from gambling are free of tax to the gambler and some consider financial spread betting as a shelter in which you can stick speculative investments to avoid Capital Gains Tax. So if you bet on forex (trade) via a spread bet company with your own money and on your own behalf with no financial interest from any other party, then currently you will not be liable to tax on your gains.
Just to add if you are trading rather then spread betting, there is a capital gains allowance of around 10k per year which you should put to good use, assuming you’ve not sold a second property or stocks or anything else which is also taxable.
Also, importantly spread betting trades are free from stamp duty which makes spread trading especially attractive for short-term traders; especially speculators that open and close trades within one day. The reason that stamp duty is non-levied is because with spreadbets you are buying a derivative of the stock, so you don’t actually own the underlying stock. Of course, this also means that if you buy LLoyds TSB’s shares in a spread bet you won’t be able to turn up at the annual meeting.
As IG Index puts it ‘financial spread bets as far as a client is concerned are treated the same way as a horse racing flutter, and as such you do not pay tax on your winnings. Consequently, you cannot offset your losses against tax. Clients are not liable for stamp duty as we as a spread betting provider pay duty direct to HMRC.’
A spokesman of Capital Spreads had this to say:
‘As yet the industry has yet to find a single reported instance of HMRC succesfully claiming tax against a winning spread betting client (but I believe they have tried a couple of times). Ringing up any government organisation and asking for an authorised statement is worthless as they are specifically told not to respond to queries such as these (as the conversation may be recorded and used in defence!). The fact is that tax on capital gains is still the same today as it was back in the 1970’s. It is all very well having capital gains tax but it is another matter trying to identify it and actually getting profitable traders to report their liabilities.’
‘With spread betting and CFD companies the trades are all within one unit (i.e. you cannot settle a spread bet trade taken with one provider by closing out with another, different, company). So it is much easier to just tax the spread betting company (both corporation tax and gaming duty). The revenue earns far more through this route than it ever will by attempting to tax individual client profits.’
Note: Tax laws can of course change but historically and at the present time, investors using this form of trading are not liable for capital gains tax (CGT) on any gains, a useful property compared to traditional share trading. Note also that CGT in any case only becomes payable if your total combined gains from all sources exceed £10,600 during tax year 2012-2013
“There is the tax position to consider with spread betting. Even if holding for the long term there is No CGT on your stock holding (if held through a spreadbet) and no income tax on your dividend stream. And no need to keep records for HMRC”