Gain or trade?
This is probably your first and most important question when determining how to treat your profits secured via investing.
When considering the profits you are making on investments and savings we need to consider firstly whether or not you are deemed to be trading or investing your money to make Capital Gains. This is very hard to define so we certainly suggest that we meet and discuss your individual requirements to ensure that every avenue is pursued and covered off
When considering the different tax implications of either
Trading
In the event it is deemed that you are a professional trader then your income would be profit or salary depending on how you trade.
This would be taxed as normal income and in turn depending on how you are ‘trading’ you will suffer tax and National Insurance on the gains made
Ltd company
You can operate your trading via a Ltd company and in turn cover costs and expenses via the business. Thereafter you can draw salary and dividends from the company in line with the usual manner of operating small business.
Your tax costs will fall into a number of categories :
- Corporation tax on profits retained in the business or distributed will be from 20%
- Personal tax will be charged on salary and any dividends that are withdrawn at rates from 0-50%
- National Insurance will also be charged on any salary that is taken from the company and that would be 12% for employees and 13.8% for Employers National Insurance
Limited Liability Partnerships
A Limited Liability Partnership (LLP) shares many of the features of a normal partnership - but it also offers reduced personal responsibility for business debts.
Unlike members of ordinary partnerships, the LLP itself is responsible for any debts that it runs up, not the individual partners.
Income is however treated as salary and in turn would be taxed in the same way
Sole trader
You would be able to operate your trading in this manner and simply pay your tax under normal self assessment rules at the end of the year.
