Who in the UK is NOT doing spread betting?

I’m just wondering if its a ‘given’ that anyone in the UK would do spread betting rather than Forex trading in the UK to avoid tax? I myself am in the UK and am wondering if I should be doing spread betting rather than just trading forex in the usual fashion and looking to pay tax at the end of it.

I’m from the UK and started with Spread Betting at the back end of 2008 - this was actually my first insight into FX ‘trading’.

After doing some research into the realms of Tax and Spread Betting it is not a clear cut 0% tax, even though Spread Betting providers like to use this term on their websites and platforms. HMRC (the tax authority) stated to myself that once your earnings from Spread Betting exceed the personal allowance of non-taxable earnings they are indeed taxable. It would then be your responsibility to declare such earnings in combinations with earnings from other sources.

Also, when I was spread betting, the data which you are actually betting on was known as an indicative price feed - which basically means it does mirror the underlying market price, but may deviate from time to time as the spread betting provider is a market maker (or a bookmaker in simple terms, just like when you bet on horses the odd’s change).

So this then leads to the question “why not trade a Margined Forex account on the spot FX markets”. Both have the same tax implications, even if you use an off-shore broker. Tax would be levied on the account profits at the end of the tax year, regardless to if they have been withdrawn into your UK bank account or if they are still sat in your brokers client pool account.

Personally I want to trade the Spot FX Market on non-indicative data feeds, that way I know im playing the same game as everyone else.

HMRC class you as a professional speculator, an income which is taxable. Just like if your income was made from sports betting.

Are you sure even spread betting is not tax free? You say once your earnings through spread betting exceed the personal allowance of non-taxable earnings they would then be taxable but isn’t this true of ANY earnings whatsoever? They’re all tax free while within the personal tax free allowance.

If what you say is true then all the hype about Spread betting being tax free was completely and utterly false.

It seems gambling is most certainly not taxable, even if it is your main source of income and no matter what level you are earning:

BIM22017 - Meaning of trade: exceptions and alternatives: betting and gambling - the professional gambler

So it would seem strange if spread betting was an exception to that.

Edit: it seems these two HMRC documents confirm that actual forex trading is taxable since you are actually investing in the market, whereas spread betting is not since you are merely ‘stating’ which direction you think the market will move:

BIM22015 - Meaning of trade: exceptions and alternatives: betting and gambling - introduction

BIM22020 - Meaning of trade: exceptions and alternatives: betting and gambling - spread betting

Your best bet is to call HMRC and ask for a detailed answer which fits your own circumstances.

I don’t know, I think those documents from the HMRC themself I just posted are pretty clear on the subject. Anyway, that was not really my question. I wanted to know if considering that spread betting is tax free, do people in the UK tend to do that or just do ordinary forex trading?

In which case I stand corrected, thank you for your correction, an interesting read nonetheless :wink: