Common Laws and Regulations of Trading on the UK Forex Market
- 23 Feb 2021
The Forex market is one of the biggest markets in the world, with turnovers of over five trillion dollars per year. Therefore, it goes without saying that there must be strong laws and regulations in place in order to manage it and to also make sure that illegalities are very difficult to achieve!
How are those laws and regulations ensured? Well, if you read FBS review, you’ll see that this particular broker enjoys two different regulations – from CySEC and IFSC. This guarantees the trader that their funds are safe and also guarantees the country the broker is operating in that the latter will not flee with the money.
Let’s take a closer look at other common legal things regarding Forex trading in the UK!
Who is Responsible for Regulation in the UK?
In the United Kingdom, there’s the FCA who is responsible for everything related to trading and to the market of foreign currency exchange. Moreover, the Financial Conduct Authority is able to operate thanks to the funding it receives from the entities that engage in financial services throughout the country.
Obviously, Forex brokers must pay the FCA in order for it to properly regulate the market and provide equal benefits/advantages to anyone that uses it or provides financial services to users.
Naturally, the FCA has ties with various other entities, such as the Bank of England – their ultimate goal is to contribute to the creation of a healthy environment when it comes to trading. The actions they take reflect the traders’ interests and they simply license and regulate the brokers.
What About Taxation within the Forex Market?
Taxation is a sensitive topic, mainly because not many people know how to deal with it, especially since Forex trading is done without an employment contract. In short, Forex traders and brokers must inform themselves regarding the tax laws and regulations regarding their field of practice.
Self-Employed Traders – in such cases, traders are subject to taxation like any other type of people that employs themselves and will pay business tax. There is no special category in terms of taxation for such traders.
Private Investors – if you’re declared as private, then you will be subject to the capital gains tax regime. This means that both your winnings and losses will be subject to various means of taxation.
Speculative Traders – as you might know, speculative trading implies that no physical asset is actually owned. Traders under this category are exempt from taxation until they break a 12k GBP threshold. In short, traders can make a profit without paying any taxes until they reach winnings of 12k.
The Bottom Line
The Forex market doesn’t imply legal trouble if you’re using it. However, you must pay attention to the broker you are trading with, as well as the trader category that you fall into.
Many people engage in Forex and experience incredible profits but forget that, like any other income, Forex profits are subject to taxation as well. At the same time, a lot of people become victims of unregulated brokers as well – those that simply charge the money and then run away.
Basically – use only regulated brokers and pay the taxes that you’re due!