We sort your Self Assessment for you. £149, all in.

Fast, effortless and 100% online.  Learn more

We sort your Self Assessment for you. £149, all in.

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

  • 3 min read
  • Last updated 29 May 2022

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 £12,570 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. It’s paid on anything you earn over £6,725
  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. 

Your situation

Outlined number oneOutlined number one
I am
Annual self-employed income
Self-employed expenses
?

Tax and profit

Outlined number two
  • Total earnings
    £50,000
    £1,000 tax-free Trading Allowance
    ?
  • Tax to pay
    £10,994
    £7,286 income tax
    £159 class 2 National Insurance
    £3,549 class 4 National Insurance
  • What you’re left with
    £39,006

How your income tax is calculated

When you’re self-employed, you have to pay your income tax and national insurance contributions yourself in your annual Self Assessment. Our calculator helps you quickly assess how much you owe.

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 less than planned
  2. You have done things that qualify for a tax relief (made private pension contributions, given to charity, etc.)

In your case when you earn £50,000:

Income tax breakdown

You pay no income tax on first £12,570 that you make

You pay £7,286 at basic income tax rate (20%) on the next £36,430

National insurance contributions breakdown

No contributions on the first £9,568 that you make

You pay £3,549 in contributions (at 9%) on the next £39,432 that you make

You pay £159 in NI Class 2 contributions

TaxScouts Newsletter

Want regular tips from us?

Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.

"*" indicates required fields

Category
TaxScouts Newsletter

Want regular tips from us?

Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.

"*" indicates required fields

Category