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 Forex Taxes in the UK - ????

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Snapman

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PostSubject: Forex Taxes in the UK - ????   Wed Mar 03, 2010 11:56 pm

I have a tax questions about forex.

I have the option of transferring my FX accont to a UK account. I was just curious how FX taxes are handled there in terms of capital gains tax and income tax.

I was considering of changing to UK account because regulations are much less strict than the US. In my US account they don't allow hedging which is ridiculous in my opinion.

Any help is appreciated.

-snapman
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Sauros

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PostSubject: Re: Forex Taxes in the UK - ????   Thu Mar 04, 2010 11:29 pm

Snapman wrote:
I have a tax questions about forex.

I have the option of transferring my FX accont to a UK account. I was just curious how FX taxes are handled there in terms of capital gains tax and income tax.

I was considering of changing to UK account because regulations are much less strict than the US. In my US account they don't allow hedging which is ridiculous in my opinion.

Any help is appreciated.

-snapman

I'm really not an expert but for me, the question is whether you're UK resident or not, no? If not, I guess that's the US legislation on capital gains abroad that rules.
In the UK, the most tax efficient is definitely the spread betting, which is tax free for individuals.
The thing is that in order not to be over leveraged (meaning 100x +) you need some amounts (the minimum £1 corresponds to a £13,500 EURUSD position)

What do you mean by "they don't allow hedging" ?
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Snapman

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Location : New York City

PostSubject: Re: Forex Taxes in the UK - ????   Fri Mar 05, 2010 2:35 am

Sauros wrote:
Snapman wrote:
I have a tax questions about forex.

I have the option of transferring my FX accont to a UK account. I was just curious how FX taxes are handled there in terms of capital gains tax and income tax.

I was considering of changing to UK account because regulations are much less strict than the US. In my US account they don't allow hedging which is ridiculous in my opinion.

Any help is appreciated.

-snapman

I'm really not an expert but for me, the question is whether you're UK resident or not, no? If not, I guess that's the US legislation on capital gains abroad that rules.
In the UK, the most tax efficient is definitely the spread betting, which is tax free for individuals.
The thing is that in order not to be over leveraged (meaning 100x +) you need some amounts (the minimum £1 corresponds to a £13,500 EURUSD position)

What do you mean by "they don't allow hedging" ?

If i keep the currency in pounds it doesn't matter, as long as i don't re-patriot money. so thats why im curious what capital gains is. Also, Im assuming it would be considered as income?

The platform I would use allows 200:1 leverage for spot forex. The Authorities in the US doesn't allow a function button that will automatically enter the same price at same time for long and short position.

Hopefully you can help me with this info, sorry for not being clear last time

-snapman
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Sauros

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PostSubject: Re: Forex Taxes in the UK - ????   Fri Mar 05, 2010 5:17 pm

Snapman wrote:
Sauros wrote:
Snapman wrote:
I have a tax questions about forex.

I have the option of transferring my FX accont to a UK account. I was just curious how FX taxes are handled there in terms of capital gains tax and income tax.

I was considering of changing to UK account because regulations are much less strict than the US. In my US account they don't allow hedging which is ridiculous in my opinion.

Any help is appreciated.

-snapman

I'm really not an expert but for me, the question is whether you're UK resident or not, no? If not, I guess that's the US legislation on capital gains abroad that rules.
In the UK, the most tax efficient is definitely the spread betting, which is tax free for individuals.
The thing is that in order not to be over leveraged (meaning 100x +) you need some amounts (the minimum £1 corresponds to a £13,500 EURUSD position)

What do you mean by "they don't allow hedging" ?

If i keep the currency in pounds it doesn't matter, as long as i don't re-patriot money. so thats why im curious what capital gains is. Also, Im assuming it would be considered as income?

The platform I would use allows 200:1 leverage for spot forex. The Authorities in the US doesn't allow a function button that will automatically enter the same price at same time for long and short position.

Hopefully you can help me with this info, sorry for not being clear last time

-snapman

As far as I know: it depends on whether you are considered by the revenue as a trader or not. If trader than there is income tax.
As far as you're not trading then (a few transactions a month would be OK) there is no tax.
There are no capital gains taxes on forex.


I know a lot of platforms don't allow to go long and short of the same pair. I really never managed to understand why you would do that (could you explain?) but I know that guys deal with that restriction in the following ways :
- trading "synthetic pairs meaning for instance to go long EURUSD they go long EURGBP and long GBPUSD at the same time
- they use different sub-accounts (or accounts) to go long and short

Lastly, a word about leverage, I was referring to MINIMUM leverage and not to the maximum. With the minimum stake of £1 on spread betting, you will hold a £13,500 position and that's the minimum increment you can add to a position. If you have a capital of £1,000 the minimum leverage you'll have is 13.5x.

Now regarding the maximum leverage I have even seen 400x and 1000x leverage (Fxpro I think, not sure). Needless to say that's totally crazy : with a 200:1 leverage on the EURUSD, a move of around 68 pips against your position will wipe out 100% of your account (=13500/200 assuming a EURUSD @ 1.3500) while the daily average (ATR) is around 150 pips. That's for scalpers who hold their positions not more than a few seconds.
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