We often hear about how Forex trading can help even the novice investor enjoy substantial and sustainable profits over time. Of course, there is no doubt that this is the case. It is a rather surprising fact that very few sources address the altogether realistic topic of how such capital gains can affect your tax obligations. CMC Markets appreciates that the astute investor always needs be presented with as much information as possible. To elucidate this topic a bit further, let us briefly examine some of the concerns that should be addressed when dealing with the HMRC.
Understanding Your Personal Limitations
Much like many other facets of tax law, each trader is allowed an annual threshold before he or she is required to pay capital gains tax. This limit is currently up to £10,000 pounds. Keep in mind that this is in reference to any given tax year and profits will not be “rolled over”. However, the greater concern is whether or not this income can be viewed as a side hustle or it is your sole source of income. Let us look at this concept in more detail.
The HMRC will place a great amount of importance if you utilise Forex trades as a significant source of income. They often consider such variables as:
• The total profits accrued from trading.
• The number and regularity of all trades.
• Any supplemental sources of income which are already subject to capital gains tax.
You will need to ask yourself how these instances apply to you. In other words, the government needs to be aware that any speculation within the Forex markets does not represent a sole source of income (or the majority of your income). It is always wise to visit the relevant pages within the HMRC website for further details.
Meeting Taxation Deadlines
While it is always important to pay any Forex-related tax obligations on time, never forget that you can be provided with leeway if you are confused or have otherwise failed to file the correct forms. Still, the most important point is to contact the HMRC as soon as possible to avoid further penalties. While this is more of a generalisation, it is not uncommon for the authorities to provide you with an extension of between six months and one year to settle any outstanding capital gains obligations. The sooner you speak with a professional, the more likely it is that such a window will be provided.
The Potential Benefits of Spread Betting
One interesting point to note is that spread betting is not subject to capital gains tax. This is why many traders adopt such positions with the help of CMC Markets CMC Markets, as there is little concern in terms of violating laws.
If you are still confused or are unsure how these rules apply to your unique situation, it is wise to speak with a trained financial professional. He or she will be able to point you in the right direction.