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I live in the UK and have recently started doing some small investing (using eToro), buying stocks and such, and I was wondering the following.

For important context, I am employed at a company where the employer handles all taxing themselves, so I have never needed to self-report tax etc.

If I made, let's say, £200 profit from a trade and withdraw it, do I have to pay tax on that £200? Both in the case that I stay under the £12570 threshold of yearly income, or in the case that that £200 makes me go over that threshold?

I'm very unknowledgeable on finances and such, so if I do have to pay taxes on this, how do I actually do that in practice?

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You will likely need to start doing self-assessment now that you are making money from investing. Whether you actually are liable to pay taxes depends on multiple factors. In response to specific points in your question:

Do I need to, and how do I, pay tax on income from investing?

Generally yes if you are resident in UK you need to declare income and gains from investing, unless they are

  • held in specific tax wrappers e.g. ISA, SIPP
  • from specific types of tax advantaged investments, e.g. VCT, EIS

How do I – via HMRC Self Assessment. You can fill in a tax return for the tax year (ending 5 April) any time after that tax year ends and before 31 Jan the following year.

I am employed at a company where the employer handles all taxing themselves

PAYE income tax and NI maybe, but it sounds like you are talking about either additional income, or a capital gain, see next point

If I made, let's say, £200 profit from a trade and withdraw it, do I have to pay tax on that £200? Both in the case that I stay under the £12570 threshold of yearly income, or in the case that that £200 makes me go over that threshold

Profit from trades would usually be taxable as Capital Gain rather than Income. You have a Capital Gains annual allowance, separate to Income Tax] – so small gains like this will likely not be taxed – but yes you should still declare them, and HMRC will figure out whether you exceed the threshold.

In this scenario you describe, for avoidance of doubt: the gain occurs when you sell the stock. And it doesn't matter whether you then withdraw the money from your eToro account or not. It's when you make the money, i.e. the sale. No capital gains tax is payable on unrealised gains though, only when you sell.

Note that the capital gains allowance is due to halve from 6 April 2023.

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  • Thanks for the clear and concise answer :D This helps a lot ^^
    – Basil
    Feb 6, 2023 at 15:32
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    You do not need to tell HMRC about capital gains below the exempt amount. "yes you should still declare them" - what do mean by "should" here?
    – AakashM
    Feb 6, 2023 at 15:46
  • @AakashM If sure one is below the threshold then fair enough, although NB: the relevant “Do I need to send a Self Assessment tax return” quiz question says “You usually have to pay Capital Gains Tax when you sell or give away (second option) any other assets, such as shares or a holiday home” Feb 7, 2023 at 9:17
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I don't know if your £200 is just an example, or a realistic approximation to how much you actually made. It matters.

For important context, I am employed at a company where the employer handles all taxing themselves, so I have never needed to self-report tax etc.

You already know about the concept that some people have to submit a self-assessment tax return so I won't explain the idea.

If I made, let's say, £200 profit from a trade and withdraw it, do I have to pay tax on that £200? Both in the case that I stay under the £12570 threshold of yearly income, or in the case that that £200 makes me go over that threshold?

The Personal Allowance (the £12750 you mention here) applies to income, but the money you 'make' by buying an asset low and selling it high is capital. For this, you need to consider Capital Gains Tax. This has a completely separate allowance and:

You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above the annual exempt amount.

For the most recent complete tax year (April 2021-2), this annual exempt amount was £12300 for most people. If your capital gains were less than that, then you do not need to tell HMRC about them.

You can use the HMRC Do I need to send a Self Assessment tax return online tool to help you. Note that the question about CGT is "Do you need to pay any Capital Gains Tax?", not "Did you make a capital gain?". If you made less than the CGT allowance in capital gains, then your answer to the question "Do you need to pay any Capital Gains Tax?" is NO, and (if your other answers allow), you do not need to send a self assessment tax return.

You can self-assess even if you don't need to, but note that once you are down on HMRC's list of "people who self-assess", it can be a pain to get off that list at such time as your tax affairs become simpler.

so if I do have to pay taxes on this, how do I actually do that in practice?

If you make more capital gains than the CGT allowance, self-assessment will allow you to tell HMRC about it, so they can assess your tax liability and provide payment options.

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