Posted on: 1st February 2018

Are Day Trading losses tax deductible?

What happens if your day trading activities result in a loss? If your day trading activities have resulted in a loss, there is the possibility that your losses could be tax deductible. You may be able to offset losses against either capital gains or other income. Whether a trader has made a capital loss or a loss arising from self-employment, depends upon whether HMRC guidelines dictate that the trader is a private investor or that he/she is carrying on self employed day trading business.

All brokers will warn new traders that losses may exceed profits. In any business venture or investment portfolio there is the risk of making a loss. If you’re a day trader and liable to Capital Gains Tax and suffer a loss as any investor might, you will be able to offset capital losses against capital gains. If you’ve registered asĀ self-employed, then a loss arising from day trading activities can be offset against other income.

You can read more about the day trader who went up against HMRC in court and won, allowing him to offset significant day trading losses against profits he had from another business. It should be noted that in this tax case the point of contention was the fact that the day trader in question didn’t provide HMRC with enough evidence to substantiate his case for being a self-employed day trader. This led to HMRC disagreeing with the day trader that his day trading losses were self-employment losses. However, on presenting the right information to the First Tier Tribunal, the day trader won his case on appeal.

Read Anna’s article in the Armchair Trader.