Registered User
Joined: 10/2/2005
Posts: 30
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Hi all,
I'm completely new to this game and am incredibly excited about trading options.  Just waiting for my E-trade account to be approved.
My problem is this.
I live in London, and here in the UK we pay exorbitant taxes (40% income tax, and I think 40% for capital gains).
As a private investor, what can I do to mitigate the proportion of my profit that ends up in the government's pockets??
Any advice appreciated!!
K
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Registered User
Joined: 12/19/2004
Posts: 457
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I have no idea what UK taxation is like, but in the U.S., if you can structure your trading as a business, that permits significantly more deductions by using what is called "trader status."
My tax advisors tell me that a U.S. trader is better off having his own entity that strictly trades the markets. It reduces the chance of an audit, and makes the likelihood of various trading expences standing up in court if the return is audited.
But for U.K. taxes, I haven't a clue.
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 Gold Customer
Joined: 2/1/2005
Posts: 51
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Kaveh,
I have had trader status for the last two years, and very happy with the outcome. The problem though is I have stayed away from equities except for IRA's (swing and day trading) . My regular account brokerage is now strictly futures, and that provides in the US. a 60%/Long term cap gains and 40% /short term, problem is with "trader status" I cannot participate with 60/40, everything is short term gains. Check and see if you get a better break with Futures. I trade British Pound, Euro, mini's , crude, etc.. Note: for most traders try Interactive Brokers, they have international desks, and I pay for equities/ .01cents per share.
They also handle futures in IRA's, although there are drawbacks, therefore I do go to smaller future firms in this country.
Contact me via forum I can check UK for you.
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Registered User
Joined: 10/8/2004
Posts: 4
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you can always move to where your taxes would be lower
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Registered User
Joined: 11/16/2004
Posts: 105
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Or start a company in Deleware or Nevada, a cash business. A lot of people in the States start a cash business to hide their cash from the IRS, whom has taken on a kinder and more gentle image of late!
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Registered User
Joined: 10/2/2005
Posts: 30
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QUOTE (mrshades) you can always move to where your taxes would be lower
The speaker at a seminar I attended a couple of months ago said he moved to Thailand for the tax breaks. Unfortunately, I'm a bit too attached to London to move anytime soon.
QUOTE (MarkAB) Kaveh,
I have had trader status for the last two years, and very happy with the outcome. The problem though is I have stayed away from equities except for IRA's (swing and day trading) . My regular account brokerage is now strictly futures, and that provides in the US. a 60%/Long term cap gains and 40% /short term, problem is with "trader status" I cannot participate with 60/40, everything is short term gains. Check and see if you get a better break with Futures. I trade British Pound, Euro, mini's , crude, etc.. Note: for most traders try Interactive Brokers, they have international desks, and I pay for equities/ .01cents per share.
They also handle futures in IRA's, although there are drawbacks, therefore I do go to smaller future firms in this country.
Contact me via forum I can check UK for you.
As a relative beginner, while I'm attracted to options, futures look very unpredictable and intimidating.
Speaking of interactive brokers, I kind of stumbled on them accidentally and haven't looked back. ($0.25-$0.75/option contract!!)
Would be great if you could check UK, though.
Thanks!
Kaveh
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Registered User
Joined: 10/12/2005
Posts: 90
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I live just outside London (Essex), and i also am clueless on tax, can we set up companies in Dubai and pay nothing? LOL.
There has to be a pay we can trade from England, and not pay 40% tax, i trade stocks in the USA (i dont pay USA tax).
Any ideas?
Matt
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Registered User
Joined: 11/14/2005
Posts: 7
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Hi Kavesh
I've been doing futures on IG Index. All profits are tax free to UK residents. [I'm in UK]. It's even capital gains tax free.
It's tax free as it is classed as 'spread betting' and under UK law betting is tax free. [Look up 'spread betting uk' for other sites]
But you're right to be nervous - it can be extremely dangerous if you're not experienced. [I learned the hard way...]. However you can learn the rules [download their pdf booklet] and play around without putting any money onto it, until you feel knowledgeable enough to start with absolute minimum amounts. Don't try to get rich quick - it'll kill you [even if it seems easy and profitable at first].
You can do options on it too, but not having done that I'm not certain they are exactly the same character as the usual kind of options.
I think in order to open an account you need to show that you have adaquate funds behind you [...£30,000??]
Regarding tax havens etc, the UK govt is tightening the loopholes all the time.
If you want to go offshore one thing you need to establish is how reliable the selected place is in honouring your privacy. More and more offshore tax haven banks are violating their sectecy agreements by sharing private information. I understand Brunei is a good place .... for a start they have lots of oil, so they can afford independence from the central banks . Also they are Muslim and therefore I think less likely to be interested in assisting the western banking organisation.
John
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Registered User
Joined: 10/2/2005
Posts: 30
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Hi John,
Thanks for all the info!
I'm curious... do you trade futures because they appeal to you as a trading vehicle, or because of the tax breaks? (or both?)
Excuse the naivete but would option spreads be classified as 'spread betting'??
Where would I find more information on offshore tax havens such as Brunei, and how to utilise them?
Thanks!
Kaveh
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Registered User
Joined: 11/14/2005
Posts: 7
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First, let me say that I am not a great authority on all this, I do understand spread betting reasonably well I think, but as yet have not been successful enough to qualify as a useful source of info.
As a trading vehicle there is more leverage.
Just in case you aren't familiar with the workings:
instead of buying $8,500 worth of shares in SBAC, expecting a rise of $2 and realising a profit of $1000 through a broker, on IG Index I can just buy it at say £4 a point [ie I get £4 for each cent the shares increase]. At this leverage a $2 rise would earn me the equivalent of about $1000 also. But I wouldn't have to part with the $8,500 dollars to buy the shares. [If the shares went down, though, I'd have a stop installed which would automatically sell [except there is a risk there of 'slippage' if they are moving fast...]]
The downside is that the open positions only have a certain lifetime, and a small forfeit needs to be paid to have the position 'rolled over'.
[Incidentally there are a lot of shares [incl SBAC] which aren't available to trade on IG !]
The tax break thing is most appealing, but doesn't mean much if a lot of money is NOT being made!
There definitely is options trading on 'IG Index', and I did do one once, but have not tried options through brokers, so I don't know if the rules are the same. [Comparing notes with a friend I suspect they are a little different.]
The spread bet sites' customer care service is free and friendly [at least it is on IG Index]. It is in their interest to get new fodder - so they are used to silly questions, and seem to take them seriously and patiently. Apparently most newbies last average of 6 months [like the Somme...!] so therein lies the proof of the dangers.
When my other computer comes back from the menders I'll be able to access some of the website favourites for tax haven info. I might not be able to post them on this forum though.
I also have a couple of pdf publications I sent away for.
John
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Registered User
Joined: 10/2/2005
Posts: 30
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I just had a look through the IG index pdf brochure and spoke to one of their customer services team.
So for US shares, minimum 'bet' is £5/point with a spread of 0.6 (including a charge for the stop-loss)
That's some pretty impressive leverage!! So a $1 move either way is the equivalent of £500. And that's the minimum bet!
With expensive stock, this could be one impressive rollercoaster ride!!
Talk about risk management being crucial.
Even still, I imagine it would be quite hard to place your stops. I mean, say you place your stop 5% below the price you pay. In addition to there being a fair chance of being stopped out of potentially profitable trades, for a $40 stock, that would still be a £1000 loss on a minimum order!
I think I might prefer the   approach to begin with 
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Registered User
Joined: 11/14/2005
Posts: 7
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........where wise men fear to tread.
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