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So, are broker commissions tax deductible? To answer this, let’s first make clear what we mean when we talk about broker commissions.
Broker commissions are fees paid to someone who facilitates a transaction for you. This can be anything from a house sale, to an investment and more. For the purpose of this guide, let’s say that we’re referring to fees that you’d pay to a FX investment broker. This often works out as a fixed percentage of your investment profits.
In this case, you’d be doing a tax return based on capital gains that you earn via the investment – and you are able to deduct these.
You can deduct your broker commission as an allowable expense from your tax return. In fact, HMRC allows you to deduct anything that you’ve wholly and exclusively spent on your business. Within reason, of course.
In order to deduct expenses, you should keep track of them using a spreadsheet or accounting software during the tax year. This way it’s a bit easier to keep things organised. Once you’ve got everything together, you calculate the tax you owe by deducting your expenses from your overall investment earnings. You’re only liable to pay tax on the profits.
If this is the first year you’ve had to do a tax return, you should first register for Self Assessment online. This is the process of letting HMRC know that you’re receiving untaxed income.
Register for Self Assessment by 5th October in any given tax year.
You will then need to pay your tax bill by 31st January of the following year. To calculate what you might owe, take a look at our Capital Gains Tax calculator:
Your total capital gains tax (CGT) owed depends on two main components:
Your overall earnings determine how much of your capital gains are taxed at 10% or 20%.
Our capital gains tax rates guide explains this in more detail.
In your case where capital gains from shares were £20,000 and your total annual earnings were £69,000:
You pay no CGT on the first £12,300 that you make
You pay £127 at 10% tax rate for the next £1,270 of your capital gains
You pay £1,286 at 20% tax rate on the remaining £6,430 of your capital gains
Yes, there are lots of expenses that you can deduct from your earnings to reduce your tax bill. Here’s a list of a few of them:
Just make sure that you keep record of everything to present to HMRC. They can ask you for evidence moths after you’ve actually filed your return.
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