Spread betting

Who here does spread betting?

What are the advantages or disadvantages of betting on the performance of the fx market instead of actually owning the underlying asset and buying the currency.

Which is best?

Spreadbetting is better than forex because you do not pay tax as long as it is not something you do for a living. Sometimes you can find that SB charge bigger swaps, but actually some providers charge exactly the same thing as forex. So basically spreadbetting is the same as forex except you do not have to pay 20-40% tax on earnings at the end of the year. Note: you have to make some earnings though, and thats the tough part (most people do not make any money).

I have no idea about spread betting. I haven’t seen any investment that’s as good as forex. However, once you’re consistent with your trading, it’s like printing money so paying taxes shouldn’t really matter. To me it’s not like you’re really working to make the money. Perhaps I just have a different idea of forex though.

Many say spread betting is better

No taxes and better leverage

Some say owning the currency has benefits but I can’t see them …

Spread betting is the same as forex except that profits are completely tax free (even if its your primary income) BUT the overnight carry over charges are significantly more… So if you trade long term, you’ll be stung. If you are a day trader, then you’ll be fine. The other disadvantage is liquidity. You’ll find if you want to place high stakes (eg £100 per pip), you’ll struggle to get filled at the price quoted and get some serious slippage.

Spread betting is only deemed to be tax free if the revenue is completely satisfied it [U]is not[/U] your primary or sole source of income.
The minute it falls under that umbrella, or they consider spread betting profits to be consistently forming the majority of your income, they will treat it just as they do any other business remuneration.

As with any potentially complicated financial dealings, it is the individuals responsibility to seek professional & legal advice to ensure they are complying with the law.

The revenue will not, under any circumstances whatsoever, accept ignorance or naivety as an excuse for non or late payment of taxes and/or national insurance contributions, & the financial penalties for deliberate avoidance are swift & severe in all cases.

Disagree if you are based in the UK. Did you check with the HMRC? Because they classify spread betting as gambling which is completely tax free. As I have a full time job and trading is my secondary income, I don’t have first hand evidence but I have checked with the brokers and the HMRC helpline…here is a snippet from the HMRC site:

Part 2:
When you pay Capital Gains Tax
You pay Capital Gains Tax on any profit you make when you ‘dispose’ of an asset, which means:

selling it
giving it away as a gift
transferring it to someone else
exchanging it for something else
getting compensation for it - like an insurance payout if it’s been destroyed
You don’t pay Capital Gains Tax on any gains you make from:

your car
your main home - as long as you don’t use it for anything else, like running a business, and the grounds aren’t bigger than 5,000 square metres
Individual Savings Accounts (ISAs) or Personal Equity Plans (PEPs)
UK government gilts (bonds)
personal belongings worth £6,000 or less when you sell them
[B]betting, lottery or pools winnings[/B]
money which forms part of your income for Income Tax purposes

My English mother-in-law works for HM Revenue & Customs Special Investigations (Section 8) Unit & that very precise interpretation comes straight from their own internal directive.

As I commented previously:
[I]It is the responsibility of the individual to seek professional & legal advice to ensure they are complying with the law - especially how it directly relates to their own financial circumstances.

check out Financial Spread Betting for a Living - the website is totally dedicated to the subject.

The main advantage for UK residents is that all returns are tax free unlike forex trading. It is a bit curious because both forex trading and spread betting are very much similar speculative instruments. Overseas investors will mainly look at CFDs which are very much the same as spread betting except that returns aren’t tax free - but CFDs have the advantage that you can trade shares via direct market access. (unlike what happens with spread betting where your counterparty is always the provider)

I am entering the world of trading with what I hope is a healthy amount of sceptism. So when signing up for a spreadbetting account I did so after much deliberation

I was told this by a trading “educator” who wanted me to sign up for one of their courses

“spread betting companies will close your account because they only make money when you lose…, We have all had SB accounts closed on us”.

Has anyone had any experience of this?

Thanks a lot

The law in the UK is ‘settled’ on this matter… check HMRC on case law. Currently in the UK if your trading personal assets as … ahum… a hobby, its tax exempt. However, as has been previously mentioned. If your sole source of income is derived from trading, its taxable. If you trade others accounts or proffer advice for profit, the tax man will want a slice. A solution then… live in a low tax country for tax purposes and spend 90 days or less where you’d rather? Maybe rotate with the seasons? :smiley:

EDIT: Better yet. Buy a blue water ocean going ketch! I was where and when exactly? Sorry… weekend post… couldn’t resist! :D:D:D