Whether you’re just dipping your toe in the investment waters or have been swimming the markets for years, you may be considering starting a business as a vehicle to trade shares.
There may be tax benefits of trading as a registered business, or you may be deemed to be earning employment income from trading rather than investment income, forcing you to become a business. We discuss the differences and ways to improve your trading acumen right here.
How do I start investing and trading in the UK?
Most people start their share investments by joining one of the many exchange platforms online. Here you will be able to buy and sell shares in a variety of markets around the world.
These types of platforms have made investing more accessible to the masses because you no longer need a personal broker to do it for you. And you can do it remotely from anywhere with an internet connection. With more of these platforms cropping up and greater competition for your business, platform fees and commission are usually low.
Before you start diving into shares, you should improve your share prices and trading knowledge. You can do this using online resources and dedicated websites, or you may choose formal training through an investment course. We have more information towards the end of our post.
Investing and dealing in stocks are usually perceived as different activities. The former is usually reserved for people who buy stocks and hold them for a long time before selling them for a profit.
Whereas the latter is generally buying and selling shares each day. This is more likely to be carrying on a business and subject to Corporation Tax and/or Income Tax. If you start as a long-term investor, you’re not likely to be carrying on business activity and any eventual profits will be subject to Capital Gains Tax instead.
Can you start a trading business in the UK?
You may be day trading shares as a business activity as a sole trader or limited company. You would need to register your business with HMRC, and then any profits you make will be subject to Corporation Tax or Income Tax rather than Capital Gains Tax. There may be tax advantages of doing it this way, such as claiming the costs of running your business from home and the costs of any resources you buy to improve your knowledge, including the cost of formal trading courses.
If you have just started your share trading business or are about to pick out your long-term investments, here are some top tips to inform your decisions:
#1: Read reliable sources
Dealing shares involves a lot of confusing and complex terms, especially for new investors and traders. Thankfully there are plenty of online websites dedicated to teaching the fundamentals of sharing, and even some going into the advanced details.
Websites like Investopedia are a great source of information for people wanting to set up a business for trading and for a variety of trading topics.
#2: Join an online community
As well as independent research, it can be beneficial for traders to join online communities where they can discuss events in the market and share information.
These groups can also be used as a way for traders to feel connected to others, especially if they are working from home and not interacting with many other people each day. Staying connected is just one of many ways to stay healthy working from home.
#3: Take note of the news
The stock market is sensitive to news and events in the business world. The only way to stay informed of these events and make your moves early enough is to read the news and press releases.
You’ll stay ahead of information about acquisitions and deals failing so you can sell and buy at the right time.
#4: Enrol in formal training
There are many courses online and offline that traders can enrol in to improve their knowledge and investing techniques.
There are courses for all abilities and, as we mentioned earlier, they may be tax deductible if they are used for the sole purpose of staff training within a business. The same can be said about the relevant manuals, webinars and books or e-books.