Help me clarify taxes on day trading

[starbright8000]

I've done some research on this subreddit and outside (revenue), and I still don't fully understand how taxation would work on day trading.

Let's say in a single day I made this trades:

STOCK
BUY
SELL
P/L

A
100
85
-15

B
100
112
12

C
200
230
30

A
300
310
10

B
100
80
-20

B
500
485
-15

A
100
110
10

D
250
280
30

E
400
350
-50

A
350
390
40

X
100
200
100

TOTAL


132

So the total gain for this day is 132, but it was done with multiple trades on multiple stocks.

How should I pay taxes here? CGT 33% on the total (i.e. 43.56) or on each positive trades?

33%

WINNING
232
76.56

LOSING
-100
-

Should I pay instead income tax at my marginal rate on the final result (yearly? monthly?)

(on that single day would be around 69.96)

In my opinion the Income tax seems to be the easier and fairer: each period (month, year, dunno) I calculate the P/L and pay the income on those. On the other hand, paying 33% on all positive trades (because I cannot offset losses for this short trades) would possibly mean paying taxes even if at the end of the period I would be losing.

Any idea, reference, document?

 

[f41thful1]

@starbright8000 You pay CGT on your net gain or loss in the WHOLE year. So if you lost 132 the day after your hypothetical trade - wiping out your whole gain - and never traded again you would have zero CGT.

Don't forget you can deduct trading costs from your net annual capital gain (assuming you make a gain!)

 

[jredfox4111]

@f41thful1 Do you know what can be classified as a trading cost? For example can I buy trading research and classify that as a cost or pay for a trading service provider?

 

[f41thful1]

@jredfox4111 Strictly a trading cost is strictly the unavoidable costs of the trade. So comission, etc.

It excludes the unnecessary costs such as the 100 you spent on the adviser to pick your portfolio, the 20 you spent on books to educate yourself, the cost of the internet connection you used to place your trade, and the 5.50 you spent on the latte to keep yourself awake.

 

[jpmac]

@f41thful1 If the next day everything was reversed with the same stocks I don't think you can offset the losses, 4 week rule. Can anyone confirm ?.

 

[jpmac]

@f41thful1 If the next day everything was reversed with the same stocks I don't think you can offset the losses, 4 week rule. Can anyone confirm ?.

 

[godisgreat101]

@starbright8000 The payment will be the netting of 33% on Gains offset by 33% of Losses. Net effect is that it is 33% of Net Gains.

However for reporting purposes it will still have to be itemized.

 

[starbright8000]

@godisgreat101 it doesn't matter how long I kept the stocks?

 

[godisgreat101]

@starbright8000 Oh well there is a 4-week rule. If you sell a stock you can only claim losses on it if you don't rebuy it over a 4 week period.

 

[starbright8000]

@godisgreat101 Yeah that’s why I was saying laying the CGT only on winning trades ignoring the losses. :-(

 

[godisgreat101]

@starbright8000 Ah sorry, didn't see that you were going in and out of same stocks. Yeah that's a tough one.

 

[seyi]

@starbright8000 Hey bud - did you ever figure it out? I can't find any concrete information out there on this either. Starting to think I might just have to fork out the cash and talk to a tax advisor.

 

[starbright8000]

@seyi No honestly I haven’t. I am not trading frequently at the moment so it’s not an issue.I have a tax assistant which declared my profits as capital gains but it was all stuff I held for months.