I have just opened a trading account with a british Broker and it is a spread betting account
I have another account with another british broker which I beleive is a forex trading account. I am awaiting confirmation on this from the broker.
In the Uk Spread betting is not taxable.
What are the advantages and disadvantages of Pure forex trading over spreadbetting account or vice versa?
I use the MT4 platform and can see little difference.
So wodja fink guys and gals?? help an old age pensioner come to grips with the modern world.
Thanks.
Cazmat
If you’re UK-resident and a UK taxpayer, the main difference is that profit from spreadbetting is free from income tax and capital gains tax.
Trading forums are full of misinformation about spreadbetting: some of it’s just very out of date, and some of it’s just plain wrong. So I’d suggest that you’re careful whose advice you take, on this subject.
There’s a widespread myth in trading forums that spreadbetting profits might be taxable if they’re your sole income. It’s nonsense. There are countless long-running forum discussions on this point, all over the web, but not one person has ever been able to produce as evidence a single instance of this actually happening, and there’s a reason for that, of course. The only way spreadbetting income can become taxable is if HMRC determines that the spreadbetting income is part of a “broader business venture” (i.e. being a vendor of trading services/products as well as doing spreadbetting) in which case they may try to allege that the entire business’s profits are taxable. (There has been litigation on this point.)
Some spreadbetting firms come into the category of “counterparty market-makers” in that the way you’re effectively “trading against the house” gives them an incentive for you to lose. Others very much less so, because they use automated software which lays off their net liabilities in the underlying market, so that it isn’t relevant to them which clients win and which lose as they make their living from the spread anyway.
Another difference is that spreadbetting firms, collectively, tend to dislike “scalpers” much more than other kinds of broker do, and tolerate them less well.
Contrary to popular belief, spreadbetting firms these days are well and efficiently regulated, and many have far smaller spreads than people imagine. The generally “received wisdom” of their having wide spreads and being poorly regulated is largely inaccurate, misleading and very out of date.
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Thank you Lexys.
I am very pleased to receive such a quality reponse.
I will see how I am treated. I have yet to make a huge profit. So until now It has just been learn and learn.
Live long and prosper my Friend!
Cazmat.
The major reason it isn’t a spotlight topic on retail trading forums is because that particular situation is rarer than hens teeth.
Try telling those individuals who have been the subject of HMRC audits & had their spreadbetting profits (yes there really are some out there!!) rolled up into gross/net calcualtions that spreadbetting profits aren’t subject to income tax.
Seeking & taking advice from anonymous, well-meaning but mostly ill-informed individuals on retail trading forums, especially surrounding important aspects of personal finance (including tax liabilities) is one of the most dangerous gaffs someone can make.
Individuals finding themselves in that extremely fortunate situation regards spreadbetting profits forming part of their primary income would be very well advised to seek the appropriate professional input from experienced practitioners.
But I very much doubt there will be a stampede to the nearest tax professionals door from your average retail trading forum member.