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bigduckontax, Accountant
Category: Tax
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After taking a few years off, I have recently started to get

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After taking a few years off, I have recently started to get back into trading Forex and I have some questions regarding how profits/losses are calculated and reported to HMRC. First of all I am trading spot Forex (ie: I trading the actual currencies. One against the other, using leverage. This is not spread betting) I am a UK resident and taxpayer (PAYE) who has a normal 9-5 job as well. My broker is in Australia and I have my account based in US Dollars. Normally the trades I take are the EUR vs USD and might last anywhere from a few minutes to several days. And the profits/losses can be anywhere from $5 per trade up to several hundered dollars. My questions being:1) How do I calculate my end of year profits or losses to report to HMRC? Is each individual trade considered seperately and would the profit/loss be converted to GBP at the time each trade is completed? ie: today I made $50 profit on a trade and that is converted to £36.95 using the exchange rate at the time I closed the trade. Yesterday I made $25 loss which converts to £18.50 using the exchange rate at that time, etc, etc. And then do I just add up the total profits/losses for the period? (quarterly, yearly, etc) I also have to pay commission for each trade, so presumably this could be considered an expense, or somehow taken off the total profits? If all of this is the case, this could be a bit cumbersome as I average over 20 trades per week. It is possible but I would need to keep records and do calculations as I go along.I didn't know if there was some other way of totaling the profits/losses over a period of time (weekly, monthly, etc) and then somehow using an "average" exchange rate to convert the profit to Pounds sterling for reporting?If all this it turns out to be too cumbersome, I could perhaps have my account based in GBP, but for various reasons would prefer it to be in US dollars.2) Is the profit then considered capital gains subject to CGT each year?I will no doubt get an accountant at some stage when it comes to actually paying the taxes, but want to see what kind of a year I have first. And just trying to get an idea of what I need to do for record keeping in my first year.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Customer: replied 10 months ago.

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

It is perhaps a pity you are not spread betting as this is outside the scope of UK taxation! Otherwise your net profits are subject to UK Income Tax (IT). You can offset your net gains by the commission you have to pay. You will have to keep records of every trade you make and any expenses incurred. I suggest that a spread sheet would suffice. At the end of each tax year you would declare your total position to HMRC by means of self assessment. You will have to register with HMRC as self employed and that Department will send you a return to complete at the end of each tax year [5 April]. You shoulsdalways use the HMRC rates of exchange for conversion.

I do hope that you have found my reply of assistance.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 6332
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Thank you for your support.