UK Spreadbetting tax rules

I've been using IG Index for a while now on my forex trades and finally am looking at the possibility of using it as my main source of income.

I know that spreadbetting is free of capital gains tax in the UK, but I have heard people say that if it is your main source of income then you do pay tax.

Can anyone confirm this, and what the tax rate would actually be? What's the most tax efficient (and legal) way of getting around this?

thx

Anyone?

Hi Mate, hope someone can help here. I need the same question answered.

Hi Monk.
I am Uk based and asked the same question of my accountant. My situation is such that my part time job as a gas fitter still outstrips the money I make on forex but I am looking to the future. Her answer was along the lines that as long as I was registered with the I.R. as self employed gas fitter and did 'some' work each year then no tax on the s/betting. I will pay for more detailed info from a specialist nearer the time to make sure though. I have trawled the governments website for info and test cases but they are very vague and couldn't give me a straight answer when I rang them myself.
Please pm me if you find out anything else .
Thanks
Andy

ps. I do know of some guys that use gibraltar for a holding company into which the profit is paid. Don't know any more than that though.

Thanks for that Andy. Broadly what I expected. I contract through my own consultancy ltd company, so as you say, if I have a job which pays income tax I should be OK.

Therefore the answer for me could be to pay the first £10,000 of profits per year through the company and pay Income tax on it. And the rest of the time trade through a personal account.

Maybe that looks a bit dodgy though? Thoughts?

It's good to clear this up now. I have a good strategy which is coming off quite niceley and I am about to ramp up the size of my trades (in line with my account size, keeping risk @5%).

As you say there is almost nothing out there on the subject at all and it looks like a grey area. Sounds like it would be sensible to pay national insurance contributions etc at the least.

Yes. Pay Ni class4 contributions to keep the pension entitlement valid - for what it will be worth. Like to hear more about your strategy and how you trade in uk time. Alot of what we read on here is not always relevant due to time zones and different markets. I am trading with ig index on euryen and eurusd from 8am to 12ish then i have been trying out apple and a couple of other us stocks at 2.30bst again with ig. doing ok so far.

I had thought along the same lines about paying tax on £10k at low level and keeping the tax man happy, but I will pay for advice as I don't think we will pay anything by the letter of the law.
you'll be ok anyway as you can just change your head and pretend you're someone else. And if they don't believe you they can asks Aunt Sally. (This will take some getting for those not british and around 40 years old)

My view on trading is to keep it simple using TAs on a 1min chart

I trade between the hours of 6am and 8am in the UK and head to work at 8, so all trades have to be closed out by then.

I only trade GBP/USD to avoid information overload

Indicators I use are RSI, Stochastics and MACD. Simple rules are driven by RSI exiting the overbought/oversold area AND Stochastics headed in the correct direction AND MACD diminishing towards the direction of trade.

Trade exit triggered by a stochastic crossover.

I avoid bad trades by taking the trend into account - if the last 20 mins have seen an obvious trend I do not trade against it. However in a 1 min chart this is not all of the time so gives plenty of opportunities.

The one missing piece of the jigsaw is to really quantify the trend impact. I'm looking at creating an indicator which is a combination of RSI and ADX, i.e if you are in an upward trend and the RSI drops to 50 then you may as well consider it to be an RSI of 20 in regular ranging conditions. It's a theory which I have yet to come up with a solution to.

That's it really. DEAD simple, and it works because my target is not over ambitious. You will know that with spread betting there is a beauty in its scalability (provided you have the margin).

I'll stick some charts up at some point.

IG by the way are bastards and I am looking for a better broker - any suggestions.

I have tried probably 8 brokers and found ig to be the best of a bad bunch so far. Their execution is fast with minimal requotes. Alpari totally useless with their 5 digit requote.
I have spent 3 years studying this with every conceivable rsi adx combo imaginable and with some success. I have gone without them for a while now in favour of macd histogram and cci with ma crossover. there is a thread in trading systems by kareem40 about rsi trendlines and they work well for exits. i have written some stuff there about how I use it. If you are on mainly m1 charts try using a rsi14 with lines at 40 and 60. See if the action is towards the 60 more than the 40 to help identify the trend. Also try a 21lwma on the rsi and trade only with/after the rsi crosses it for trend confirmation.
Also try 45 and 55 lines on the rsi and observe the effect they have. It's surprising to see the bounces.
Andy

UK Tax Laws on fx as only income scorce anyone ??

Check T2W site. If it's sole income from spreadbetting you're a professional gambler, and while there's not been a test case AFAIK for s/betting, there have for gamblers on the horses, and he was found liable.

My only advice is never speak to the tax office for some friendly advice because you're guilty until found innocent - check it out with an accountant instead.

Good call about tax Office Cheers