Tax Issues to be Aware of When Forex Trading

Posted on January 09, 2017 by Guy Atkinson

The main aim of any forex trader is to make as much money as possible through buying and selling currencies. However, as with any job, when you start to think you’re making more money you can then end up paying a lot more tax and it will feel like all that extra effort wasn’t worth it. With forex trading this isn’t necessarily true as there are many tax benefits, but for UK residents there are still a number of tax rules you must follow, whether trading part or full-time with FxPro.


Capital Gains Tax

In the UK you get a £10,000 personal allowance, meaning you only get taxed on profits above that amount, before you need to begin paying Capital Gains Tax. This is at a rate of 18% and must be paid whether trading forex is your full or part-time job. If you are making regular profits of over £150,000 then the rate can increase to 40 or 50%.

However, if you are self-employed as a forex trader then you need to account for, and make arrangements to pay, national insurance and income tax. Being registered as a self-employed forex trader can be quite tricky though, in most cases HMRC will assess where you fit in to determine what rates you should be paying.

Spread Betting vs CFD Trading

Spread betting is a popular way to trade forex because it is tax free (unless it becomes your main income). This is because you are not considered to have actually traded anything when spread betting, so therefore are not liable for profits or losses on trades. If it is your only income you will have to pay income tax on earnings.

With CFD trading it is liable for Capital Gains Tax, but not stamp duty or income tax. This makes it less tax-efficient for part-time traders but more advantageous if it is your sole source of income, compared to spread betting. Losses can also be declared to claim tax relief.

Declaring and Paying Tax

Where forex trading is your sole source of income you will need to register as self-employed with HMRC. It is likely that you will need to file a self-assessment tax return to ensure the rates and amounts you are paying based on profits and earnings are accurate. Then you will need to stay on top of future profits to make sure you don’t end up paying too much or little and getting into financial trouble.

Once you are aware of these tax issues and have sorted them out, you should be all set to start or continue trading forex while meeting all UK tax requirements.

Tip of the Day

Time management for Finance Professionals

time management


I’ve just re-read Richard Denny’s fantastic book ‘Selling to Win’, in which he mentions a time management technique that I learnt many, many years ago from an old boss of mine.


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