Spread Betting (UK Based)

Beginner Questions
1

Hi all.

I’m relatively new here, so let me introduce myself!

I’m Alfie, currently on a gap year, and I’m really interested in the world of FOREX.

I’m coming to the end of my trading course with babypips which has been incredibly helpful!

As of December 2017, I started to spread bet on IG Index’s demo platform. You are given £10,000 in this demo account, however I only traded as if I had £1000 in my account, because this is what I intend on starting with. My first month in this demo account has been very profitable, with me making profits of just under £500!

However, I understand that this is only a demo account, and that real life trading will be somewhat more intense.

I have a few questions.

My first question is in regards to spread betting. From experiences, is spread betting a ‘scam’, and are the brokers against you? If so, am I better of trading options, futures or ETFs?

My second question relates to my first one. If spread betting is legitimate, does anyone know of any good spread betting brokers?

I look forward to hearing back from someone!

Many thanks
Alfie

2

That’s a very wise approach.

Well done - but that wasn’t trading: it was gambling. Not because it was spreadbetting, but because it isn’t really possible for anyone to achieve a 50% return in a month without crazy position-sizing. So, I don’t know what you’ve been doing wrong, but I know you’ve been doing something wrong.

I know that’s a totally unhelpful thing to say. Sorry about that. But it’s still true.

No.

Some are, some aren’t.

Just like counterparty forex brokers, if they automatically lay off their own net liability in the underlying market, they don’t care which customers win and which lose because they’re making their living off the spread.

Some do that. Some don’t. It’s very difficult indeed to know which.

Beware: an awful lot of forum “information” on this subject, in this forum and in others too, is either very out of date, or very prejudiced, or sometimes both, because the people with the strongest prejudices against spreadbetting are typically the same people who have never bothered updating their information on the subject.

The spreads aren’t so bad at all, these days.

The regulation is very good indeed, because they have the FCA breathing down their necks (and that’s more than can be said for most of the “brokers” that most members of this forum are using).

It’s a perfectly sensible approach, provided you take care which SB firm you use.

But most importantly of all, you need to be careful because at the moment you’re gambling, and I think that’s probably because your position sizes are way too high for your account size. Obviously I’m guessing that only from what you’ve said about making 50% profit in a month.

If it helps, I recommend London Capital Group - personal preference only, but they’re honest and ethical people, in an industry in which not everyone is.

If you’re lucky, you’ll also get a reply from Tommor as well. He uses spreadbetting and knows plenty about it, and you should take note of what he says, too.

2 Likes
3

Hi @alfied

10,000 deposit on demo is not like real life because the Margin levels going to be different with 1.000 deposit

Firstly: if a broker is going to scam you when using a spread betting account
Then there going to scam with a CFD account or you whatever INSTRUMENT your using…!!

Second: IG is one of the top rated brokers

Thirdly: there’s Broker review sites .

https://www.100forexbrokers.com/

Lastely Start with spreadbetting

1 Like
4

To be honest I’m reading your reply, which seems to have almost nothing to do with the OP’s questions and wondering whether you even know what spread-betting IS.

5

Yeah it’s different to CFD’s

he’s still got to go through a broker

6

Get better then m8 i can .:alien:.

7

Hi Laughing Charlie,

Thank you very much for your reply!

In response to your points about my methods of trading, the maximum amount of my capital that I would have tied up in margin would be around £200-£250.

With each trade that I placed, I’d usually place £1 per pip of movement, with a stop loss around 15 pips, resulting in my risk for that trade at £15, 1.5% of my initial deposit. I usually aim for a 2:1 profit:loss ratio.

The information that you have supplied is very helpful, and thank you once again!

Many thanks
Alfie

8

Hi A1len Trader,

Thanks for your feedback! I’ll have a look at the review on that site.

Many thanks
Alfie

9

Your going to start with £1000 whats your Leverage?

A minimum spreadbet on my broker is £0.50 and would need roughly £8 to open the trade with a 1:500 leverage
50p per pip profit

double it for £1 per pip profit would need £16

I did this to start and got over £500 first week with £250 deposit no big trades just sensible trading approach. so thats 200% in a week

what is spreadbetting @LukasVisser you tell me? cos i didn’t really wana go ito detail have not the time, One is tax free the other aint and well just stick with SB FX Pair’s @alfied

10

@alfied
Stick with Spreadbetting fx pairs for now Get to know your Margin Requirements and Restrictions first
and “position sizes” thank’s lLaughingCharlie

11

You know what been concentrating on something well trying to so may have got 2 posts mixed up
Soz Everyone + @LukasVisser + @LaughingCharlie

12

ARe CFD’s not tax-exempt then ?

In honesty - I can’t really see any difference in practice, except yu can spread bet future and therefore there is no “swap fees” - but there is a “Rollover fee” if you get to the end of your contract and want it to continue.

I used to use Cantor Index - but I’m not sure they exist any more !

13

@Falstaff
Unlike share trading, profits made from spread betting are exempt from stamp duty and capital gains tax (CGT) in the" UK*. Since you don’t own the underlying asset when trading CFDs, there is no stamp duty to pay*. However, you will be subject to capital gains tax.

thats the main difference as to tax. in the “UK”

With CFDs, your profit or loss is determined by the difference between the price at which you enter and the price at which you exit, multiplied by the number of CFD units.

Spreadbetting
To calculate your profit or loss, find the difference between the price at which you enter and the price at which you exit, then multiply this difference by your stake.

Spread betting shares no commission cost CFD’s pay commission.and Holding costs

14

Don’t forget @LukasVisser i am a new Trader too not claiming to know everything,

15

I’m guessing soon as you hit 100k profit the Inland Revenue may give you a call ?
I Don’t Know the precise details Yet but If you had to pay Tax you can offset your losses, computer stuff, etc against the tax bill…:alien:

16

You’ve done incredibly well, to make £500 that way, in that time.

I instinctively agreed with what Charles said about overstaking, but you’re not enormously overstaking at £1 per point per £1,000 with a 15-points stop-loss. Maybe just a bit?

I’m not trying to sound like a downer, but don’t expect every month to be so good. :slight_smile:

1 Like
17

Yes I understand that - but at the end of the day - Both are simply “Gambling” - so why the tax difference ?

[Edit - in response to OP’s “profit” - it is important for you to realise that the last couple weeks or so are abnormal in that pretty much any bet (upward) is profitabe - That is NOT normal ! - plaesa continue “Demo trading” for a good while yet :slight_smile:]

18

Spreadbets are treated differently to contracts for difference. The providers that offer spread betting pay betting duty direct to the HM Revenue & Customs, so the bid-offer spreads tend to be slightly higher to cover the tax. From 6 October 2001 there has been a 3% general betting duty charge on the financial spreadbet company’s net stake receipts (that is, the total of all bets received, less any winnings paid out). As such the taxman will treat any gains from spread betting activities as tax-free but this also means that losses cannot be claimed against other income.

Contracts for difference on the other hand have a lower spread and providers do not pay betting duty. But this also means that any realised profits are subject to CGT and therefore exempt from tax on about the first 9k. There is also a risk that if you are professional CFD traders the tax man might argue the point that profits are subject to income tax rather than CGT in this instance.

With the advent of the internet, many bookies set up offshore offices so that they did not have to pay UK taxes, and also the punter did not have to pay a 9% tax upfront on the bets they made, and the government was losing a lot of tax on the profits of the bookmakers. So in about 2001 - 2002 I believe, tax on winnings was abolished. By scrapping the tax on winnings many more people were encouraged to gamble, and the government was able to collect tax on profits made by the bookmakers, and as it is a fact that more people lose than win, whether that’s on spreadbetting or any kind of gambling they collect more this way than taxing the punter, and as has been pointed out, most traders are part time, and the majority lose money, so this could be offset against tax on earnings.

Does that help/?

1 Like
19

So if you use an ECN account and pay commissions it’s not tax free your liable to pay Taxes.:alien:

Don’t Break the Law just Bend it a bit…lol

Bit of a grey area laws change to suit

20

Not how it works in UK - Gains on capital or losses oncapital cannot be offse against “income” - they would need to be off set against “gains on capital” - but we can hold those losses for a year or two.

As you say - “gambling losses” are exempt because most people (95%) LOSE !