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Can forex trading (UK) be a full-time job?

If you start forex trading (UK), you need to make sure that you’re doing it at volumes that can support your livelihood. It’s the same with any other pursuit that you take on freelance. You have to ensure that you have enough business (and income) to do it full-time.

What is forex trading?

Let’s start from the beginning. Forex trading is basically foreign currency exchange. You bet on the movement on currencies to make a profit. And as so many currencies are very volatile when it comes to the movement in their value, the space is very popular for traders. 

The two popular methods of trading are:

  1. Derivative products
    • Spread betting
    • CFD trading
  2. Via a forex broker

Read more about forex trading here. 

Why start forex trading (UK)?

Unlike your standard 9-5, the forex market is open 24/7. This means that you can easily dabble in it during your spare time before you take it on full-time. Another advantage is that it’s a very accessible pursuit. You can start forex trading from you phone, laptop – and all from your sofa. 

Here’s a list of other features that make forex trading attractive to take on full-time:

  • Lots of resources online to learn how to trade forex
  • High profits (although high risk)
  • Low transaction costs
  • Big selection of currency pairs to choose from
  • It’s decentralised – the market isn’t owned by one central power

Are there disadvantages?

There are disadvantages to going freelance, in any industry. The lack of stability is the major disadvantage and one that’s even more pronounced when you’re just starting out. When it comes to forex trading specifically, the risk can be significant.So it’s not something that you should give up the day job for without ample research and preparation. 

Another risk in forex trading is that fraud is rife in the space. Not every broker will have your best interests at heart so it’s very wise to tread carefully. 

Tax implications of forex trading

Working as a full-time investor will mean that you’re responsible for paying your own taxes. You’ll have to do this via a tax return after the end of each tax year. There are potentially three types of tax that you might owe:

  1. Income Tax – the tax that we all have to pay on our earnings when we earn more than the Personal Allowance (currently £12,500 per year)
  2. National Insurance – we pay this to be entitled to certain state provided benefits such as the Marriage Allowance or the state pension
  3. Capital Gains Tax – which will depend on how much profit you made from your investments. The current tax-free allowance when you make capital gains is £12,300. Anything you make in profit that exceeds this will mean that you’ll be liable to pay capital gains tax

Take a look at our guide to learn more about Capital Gains Tax. Or if you’d like to calculate the tax you’d owe from your income, use our self-employed calculator below. 

Annual self-employment income
£
Self-employment expenses
£
Select tax year
Income after tax
£37,986
Income tax
£7,300
NI
£3,714
Total income tax
£7,300
£12,500 taxed at 0%
£36,500 taxed at 20% : £7,300
Total NI contributions
£3,714
Class 2 NI: £159
Class 4 NI at 9% : £3,555
What you’re left with
£37,986

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How your income tax is calculated

As a self-employed you have to pay your income tax and national insurance contributions yourself during your annual self assessment. Our calculator helps you quickly assess how much payment is due.

However you may be eligible for a tax refund when:

  1. You already made tax payments for the year but your annual income ended up smaller than planned
  2. You have done things that qualify for tax relief (made private pension contributions, give to charity, etc)

In your case when you earn £49,000:

Income tax breakdown

You pay no income tax on first £12,500 that you make

You pay £7,300 at basic income tax rate (20%) on the next £36,500

Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.

Have a minute? See how it works

More guides & useful information

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