United Kingdom Tax Situation

Financial spread betting is one of the most tax efficient ways of speculating on the stock markets and other financial products. All profits you make from financial spread betting are free of Income Tax, Betting Levy and Capital Gains Tax.

The position as I understand it for UK Residents is that currently under case law, betting winnings are generally not subject to tax. Where spread betting is done on an ad-hoc basis, and as the law currently stands, winnings are not taxable. However, if for example, banks and investment firms started wholesale spread betting to complement their dealings with other financial instruments, then it would be quite likely that the tax authorities might challenge such a scenario and 'could' seek to have income generated from such activities taxed.

This status would then appear to apply to professional 'gamblers' and 'spread betters' where, as it currently stands, the Inland Revenue do not seek generally to tax winnings on spread betting. It does appear that should the tax authorities wish to incorporate taxing such winnings in the future they would need to seek an amendment.

As of October 6th 2001 the Chancellor decided to abolish Betting Levy, making spread betting a completely tax free* way to trade.

(*Tax laws can change).

So with spread betting (spread trading), the proceeds are free of Income Tax and Capital Gains Tax.

What You Make is What You Keep!

Ah, I can hear you cry, this can't last for long. Surely the Inland Revenue will put an end to that now that Spread Trading is so much more popular! Well maybe they will but there is one good reason why they don't.

You see most people DO NOT trade with a sound and well thought out trading strategy so in effect they are playing hunches or simply have insufficient knowledge and skill. Therefore, most people lose! If the proceeds were taxable then losses could be offset against tax, so the Inland Revenue currently are likely to be in a net loss situation.

The down side to spread trading is a simple one. You pay a wider spread than if you were to physically buy the share and pay the market spread. This covers the costs and profit for the spread trading company. Personally I think this is a small price to pay when you consider the advantages.

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