I like IG, the fees are high but they have a huge universe of Equity CFDs to choose from, the fees are high if you are just starting out, once you trade 10k/trade it evens out. Unfort I'm not in the UK, but if I were it wouldn't even be a choice, you guys have a legal taxloophole for trading.
You can spreadbet but you cannot make money with options unless you just stick to strangles -the spreads are very wide though . IB is cheap- in the UK we pay silly money in comms -for stocks I use Degiro. We have a shit company called Computershare which does not allow online trading! It's about £60 to sell shares-and people still use it. I should have started trading US options really -the UK is a joke for retail
This makes even less sense. If you make a certain nr. of trades your trading income will be taxed as income, if you trade e.g. 50 times a year why would you even consider weighing trading costs against the perk of not having to pay tax on your winnings? The only angle I can come up with is when you live of the spread betting, otherwise it's spread betting tax advantage all the way if I'd had the choice
"If you make a certain nr. of trades your trading income will be taxed as income," Extremely unlikely and certainly not for a mere 50 trades a year. I do thousands of trades a year, and it's still classified under CGT rules (there are other tests you would have to meet). Here's a back of the envelope calculation I did in my third book: "Let’s look at a worked example. For the Starter System, which is expected to trade 5.4 times a year (see page 67 to understand why), gold futures have risk adjusted trading costs of 0.006, versus 0.029 for Gold spread-betting. To get the annual cost as a percentage of our capital we multiply these figures by the risk target of 12% (I’ll explain where this comes from in a few pages – page 71 to be precise). That translates to a cost of about 0.07% for futures (0.006 ×12% = 0.07%) and 0.35% for spread-bets (0.029 ×12% = 0.35%). The expected pre-cost return of the Starter System on both futures and spread-bets is about 5% a year. A gold futures trader with £331,400 in capital can expect to make 5% - 0.07% = 4.93% a year after costs, or £16,338. After allowing for the tax free allowance of £11,700 they’d pay tax on 16338 – 11700 = £4,638. CGT at a rate of 20% would cost 20% × 4638 = £928 leaving them with £15,410 in after tax profits. A spread-betting punter with the same capital would make 5% - 0.35% = 4.65%, or £15,410. They have no further tax to pay. You can now see that I chose the rather odd figure of £331,400. This is the break-even point where the tax benefits of spread-betting exactly match the hindrance of extra costs, at least in this example. With capital of less than £331,400 you’d be better off trading cheaper futures. With more than £331,400 the tax savings of spread betting give it the edge. This break-even figure will vary depending on the level of taxes, the precise cost difference between products, and your expected returns. But clearly only extremely wealthy traders can benefit from the tax advantages of spread-betting. Although my own trading account is relatively large I prefer futures to spread-bets. Firstly, because my your orders are passed through to the exchange, which is preferable for reasons I explained back in chapter three. Secondly, because costs are relatively predictable, but returns are not. This makes the tax advantages of spread betting more uncertain than the higher costs." GAT
Pay the taxes-spreadbetting is NOT the market if you are a regular winner you will get hamstrung by the platform, who don't even need to hedge -the retails players nett off each other and the spread gives IG millions in free money
Does anyone know how much detail is required in the tax return when submitting to HMRC when trading futures? If you have done a 100 round trip trades in a tax year so have realised the gains/losses in that year, do you have to list each trade and the realised gains and loss for each of those trades? This is obviously cumbersome. Or would a summary of all gains/losses provided by the broker suffice?
Nope -but if your turnover is >£85k you will have to submit long tax form and possibly proper accounts
Thanks - I am not sure how to calculate turnover for futures. Some contract notionals exceed that for a single contract. Do you mean PnL? Also please could you point me to link showing a long tax form?
It comes down to whether you are paying CGT or income tax. As discussed earlier in the thread, for most futures traders you are paying CGT. If you are paying CGT: then in theory you need to list each trade. I've always done this, so I've never tested to see if you could get away with anything less. I've written a python script that does this, otherwise yes it would be onerous. Here's an extract from last years report. The detail shown is for a single trade. Code: 2: SELL 1 ZW DEC 21 Futures on 14/01/2021 at USD 33,050 each gives PROFIT of USD 1,151 equals GBP 831.960 Commission USD 2.82000 and taxes USD 0 on SELL Trade details:ID 4094 Code ZW DEC 21 Date 2021-01-14 21:01:02 Quantity -1 Price 6.61000 Value per block 33,050 Total allowable cost USD 2.82000 Total disposal proceeds USD 1,153.43 Matches with: PRO-RATA SECTION 104: Quantity 1.000000 ZW DEC 21 allocated from total holding of 2, made up of 2 trades between 2020-11-18 and 2021-01-12 At average value of USD 31,893.75 Commissions USD 2.82000 Taxes USD 0 Trades: ID 3652a Code ZW DEC 21 Date 2020-11-18 21:05:02 Quantity 0.500000 Price 6.14500 Value per block 30,725 (Allocated from: ID 3652 Quantity 1) ID 4093a Code ZW DEC 21 Date 2021-01-12 21:00:11 Quantity 0.500000 Price 6.61250 Value per block 33,062.50 (Allocated from: ID 4093 Quantity 1) CALCULATION: (1*33050) - 2.82000 - 0 -(1*31893.75) - 2.82000 - 0 = 1,151 Summary for tax year ending 5th April 2021 Figures in GBP Disposal Proceeds = 313,413, Allowable Costs = 271,480, Disposals = 414 Year Gains = 189,949 Year Losses = -148,017 PROFIT = 41,932.63 If you are paying income tax, basically being treated like running a business, then no you wouldn't need such itemized reporting. For my self employed income (consultancy, journalism, book royalties) I just report a single consolidated income and costs figure. Of course you'd need to keep records in case of an audit. For turnover, if you were trading futures as a business with the profits treated as income not CGT, then your turnover would be equal to your net trading profits for the year, before paying any expenses such as interest and data fees which you can deduct if you being taxed as income (and I don't know whether commissions would be part of those expenses; they're deducted from CGT profits). So it's the 41k in the example above, not the 313k of disposal proceeds, and certainly not the many millions of pounds in notional value I would have traded. So when I worked in a bank (trading futures, options and swaps) our 'desk revenue' was around £100m, out of which we had to pay salaries, bonuses, shareholder profits and also support the various bank cost centres that supported us. But we'd actually have traded notionals of ~£2 trillion over the year. The 'long form' / short form terminology is a bit outdated and refers to paper forms. Most people do self assesment online not on paper, and the online form automatically asks you questions to see which bits of the SA are relevant to you, and then only asks you about that. The more important part about 85k is that it is the limit at which VAT reporting kicks in for a self employed person or business. I'd struggle to understand how relevant VAT would be for a self employed trader. And in any case I'm not sure this 85k applies to most futures traders. As discussed earlier it's most likely that your futures trading profits would be classified as CGT, not income, so you wouldn't be treated as a self employed person anyway. GAT