I am UK based and employed so pay PAYE etc on my salary. I have been trading for a while with small capital and making small profits. As I am now consistent and have some more capital there is the potential to increase my trading size and hopefully make corresponding profits.
I day trade indices so can either trade these as a CFD or spreadbetting.
The internet tells me that spreadbetting is tax free while I am still employed. Can anyone verify this and if so do I need to get this agreed with HMRC or get tax advice? Or is it better to trade CFDs?
If tax advice can anyone recommend a firm to talk to.
Thanks for the reply - so I don’t need to tell HMRC anything about spread betting profits? Seems odd that if I did the same trading but as a CFD I would be liable for tax
but because it’s legally “betting” you’re under no obligation to report it to HMRC - there’s even case law on the subject, now
that said, it’s generally a bad idea to seek and take legal advice from anonymous strangers in a forum, but HMRC does have a telephone helpline where you can ask such questions anonymously (or they did, anyway)
people who ask in forums are often given horribly mistaken, out-of-date information …
You do not pay tax on spreadbetting - as long as you are losing money ! - think about it - you would be able to claim tax relief on your losses and most people lose money.
The situation becomes a little more complex when (if) you become significantly profitable and spreadbettuing IS taxable if it becomes your main or only source of income. (So does other forms of gambling) - The exact threshold is unclear but bear in mind that you can earn something like ÂŁ15k pa from investment or capital gains before tax kicks in.
Don’t stress about it until you get to that sort of level - then you will need to consider it - perhaps - but you will then need to do your own research - don’t rely on general accountants - and certainly Don’t rely on “Advice” from HMRC ! find the rules for yourself and set up your situation to YOUR best advantage !
But for the moment - tax is the least of your worries !
this very widespread belief is actually a mistaken one - not only mistaken, in fact, but ironically enough its actually the exact opposite of the reality
there’s been a long-overdue UK High Court ruling on this subject, which has finally clarified the position and removed all the ambiguities about this
the only party ever assessed for tax on spreadbetting profits was someone (the appellant in the case concerned) whose spreadbetting income was part of a wider trading business … in other words it wasn’t his sole income at all - he also sold trading signals and coaching, and because of that, the court held that his entire business, including the spreadbetting profits, were taxable
it was also expressly stated in the judgement that someone whose sole income was from spreadbetting would not be liable for taxation on it - neither for income tax nor CGT
but as i mentioned above, what matters is that anyone still in any doubt about this should confirm their own tax situation, as it affects their own income, by speaking to staff at HMRC’s helpline, rather than by depending on anything - however well-intentioned - posted by an anonymous stranger in a forum!
sorry - can’t remember the name of the case, now (and am no longer a UK tax resident myself, anyway, at the moment) - i did try Google, briefly, before posting above, imagining that it might be easy to find, but didn’t manage to … i remember reading all about it in another trading forum a couple of years ago, anyway, and it was all referenced there, so you’ll doubtless find it with a look around
please excuse my repeating yet again that what matters in these circumstances is for people to take their advice from those qualified and authorised and licensed to give it, not from comments made in forums!!
Interesting that you express yourself to have more and better knowledge than those of us who have researched the subject - yet cannot even name the case or link to what would (if true) be completely life -changing information - which was clearly NOT known at the time to what you call “experts” or even Hmrc !
(else there would be no need for new Law to be made by the Courts !
In the meantime I shall and I counsel our OP to ignore your remarks - since you are clearly “flying a kite”
SB profits in the UK are tax-free. You don’t need to record or report them. I have had times when SB profits were my sole income, and in excess of the income tax threshold.
There are no no tax implications from spread betting in the UK. Been there, done that.
Hi Hubber and welcome to the forum.
My father was a horse race fancier. He always limited his bets in the 1970s to 3p yankees, and in the 2010s before he passed away to 50 yankees, that is inflation for you. Anyway he once famously won ÂŁ1,500 when his home was worth about ÂŁ4,000 so paid off his mortgage. In those days you could choose to either pay tax when you placed the bet, and your winnings were tax free, or not pay the tax on the bet but pay tax on your winnings. My father always paid the tax on the bet because he felt he had an edge, and I think he did as well.
The reason the UK government allow you not to pay tax on winnings from gambling is because there are far more losers than winners, and if you pay tax on gambling winnings the implication is that you could deduct tax from your primary income to offset your gambling losses. You see, there are always two sides to the coin.
So update on this - I discussed with an accountant and spreadbetting and all spreadbetting profits are not taxable. I asked what happens if you spreadbet as a full time income. he said again that this would not be taxable.
Basically if it were taxable everyone who made a loss would be able to offset this against any tax liability costing HMRC a fortune.
good to know that all accountants, lawyers, HMRC themselves and now courts are singing from the same hymn-sheet on all these points (and one that obviously makes complete sense) - and by the way, good luck in Spain! (my guess is that you’ll trade CFD’s there rather than spreadbetting, when you have to be resident there for tax purposes, anyway?)
Good research. Keep an eye on the tax situation as things can change.
Incidentally, SB is not tax-free because there are more losers than winners - there are no more winners in CFD trading, which is taxable. The tax applied to CFD profits is Capital Gains Tax, not Income Tax. CGT is payable on the profits from the sale of assets: a spreadbet is not an asset and therefore there is no basis for the income from it to be subject to CGT.
