Hi - I have started trading CFDs this year and was very lucky so far. At one stage I was up over 500%, but took some knocks. I am still up over 300% so I shouldn't be too depressed! In the past I was more an investor so my tax used to be easier. What I need to know is: - How do I handle tax in the best way? - Is it better to convert to cash over the end of the tax year? - What happens if there is a big loss on the first of March e.g. I get wiped out? - How will I be taxed - is it a percentage on the P&L as on the 28th of February? - What advice can anyone offer on managing tax on CFDs? - Is there any exemptions or do I pay from the first rand that I profit? - Is it better to have two portfolios (one for trading, one for investment)? Or even more? All comments and advice welcome - I am sure I am not the only one curious if there are better ways of doing it.
CFD is trading not investing. You will be taxed full on your profits, there is no capital gain. CFD is a position you take, you don't own the shares, the bank owns the shares and your position is settled in cash at the end of each day with the bank. You therefore realises your profits and losses daily. Converting to cash at year end means nothing as your convert to cash daily. Even the "dividends" you receive will be taxed, because you don't actually receive the dividend because you don't own the script, the bank does. Sorry bad news ...
I understand - I have been trading CFDs for the last year and understand the concept as well as the tax implications (vs. Investing). What I want to understand is: 1.) What value am I taxed on? (I believe it is the total profit minus total losses from March 1st to February 28th) 2.) If I show a nett loss for that period, what impact does that have? 3.) Are there any measures I can take to minimise the impact? I am worried because: I just experimented with several CFDs and ended up making a profit that most people would call an annual salary!
Thanks, For anyone interested - here is prancing horse's answer for your convenience: ---------------------------- Firstly you should or rather will have a completely separate account for your CFD trading. You will or should get a complete summary of your transactions for that financial year. Your costs are fees, losses, int paid and this subtracted from all your income, ie profit, divs, int rec. On your net profit you will be taxed at if it was income. What I do is, the last week of Feb I take 40% of that profit and add it to my provisional tax payment. ----------------------------- I think that is a good idea: Last week of February, withdraw 40% of profit and either pay as provisional or store in a safe place i.e. away from temptation :-)