Tax Strategies for Traders

Spread Betting Taxes: Is Spread Trading really Tax-Free?

The attraction with investing via spread trading than directly in shares is that gains are tax-free, there is no stamp duty payable and, for a large outlay, the capital required can be relatively small, which is particularly useful in the current financial environment where debt is hard to come by.

We are often told that spread betting in the United Kingdom on financial products is regulated by financial regulators but any profit is considered gambling income for tax purposes and in the UK, gambling income is tax free.

But is Spread Trading really Tax-Free?

The best answer I can give you is that this is a really grey area. It depends whether you are trading full or part time. Let me explain further.

It is dependent on your local tax office’s view of your spread betting activity. I know it sounds crazy and, in all honesty, it is. If you are making money, from trading full time, then your local tax inspector can treat this as your main source of income. Your profits would not be treated as Capital Gains but, as profits generated from speculating on whichever market you’re trading on. Therefore, they are subject to income tax.

It is up to the tax inspector to interpret these regulations and make a ruling on your tax position. In these hard economic times I will be very surprised if your winnings from spread betting are tax free. That is not to say that small winnings will not be tax free, but there again how big is small?

This is, almost, an identical scenario to that of a professional horse race bettor. There is no tax payable on stake or winnings, any more. However, if your sole source of income is the profit from bets on racing, the tax man would want to know how you are supporting yourself and could slap an assessment on you.

This whole area of profits from betting (spread or other) is a minefield. Accountants can’t agree amongst themselves and neither can HMRC offices.


a). if this happened to me I would see them in court. No way would I hand over tax free winning to the taxman without a fight in court and then an appeal if I lost. Think about it, if you can be taxed on tax free winnings then it’s good bye spread bet industry forever, hello regular broker. I cannot believe that spread trading industry serve no purpose after all these years so the tax free thing must stand surely in a court of law.

b). if you are worried, go stack shelves at weekends in Tesco. That’s your regular income. Anything else is therefore tax free gambling winnings.

Overall – it boils down to how you earn your income. If you are a PAYE for even relatively small earnings your spread trading income is non declarable. IF your spread trading income becomes your sole income then the situation changes; and as others have said the benefits of having an spread trading account disappears. The tax office would regard it as earnings not CGT. I fill in a SA each year but do not declare my spread trading income in the same way I don’t declare my tax free pension lump sum. I would, however, start to declare spread betting earnings if it became my sole income.

But winnings from gambling isn’t ‘income’ in HMRC terms. The tax has already been paid by the spread trading company, so Her Majesty can’t take it twice. Do Lottery winners pay tax on their millions? Victoria Coren has made huge sums playing poker and often spouts off in national newspapers about it being tax-free…

People pay tax on their salary. If they save some of that net income and put it in a deposit account, that pays interest, this interest is taxed also. Is the interest, earned on their deposit, their sole source of income? No, it isn’t. There are many other examples that I won’t get involved in here.

Lottery winners do not pay tax on their winnings because it’s a one off. I don’t know what the tax arrangement for Camelot is but, I would hazard a guess that their charitable donations would be a key part of this. Vicky Coren does not depend on playing poker as her sole source of income. She is a successful author and journalist. Poker is a profitable sideline for her.

As a retired tax consultant, I have come across many controversial aspects of tax law. These controversies, and differences of opinion, keep taxation specialists in business.


Update November 2011: I’m currently negotiating a settlement on behalf of a third party with HMRC where the spread betting profit has become taxable due to the nature of his business and the size of the gains. The consistency over a number of years is also a factor. This may be a rare occurrence but it is something that investors need to be wary of. Most people that spread bet lose money which is why HMRC do not go near it.


Taxes are a burden on all of us. I don’t think any of us reject the idea of no taxes, however there’s not much we can do, we have to obey the law and pay the taxes. This is not the case if you live in the United Kingdom and bet on spread.

That’s right, the best thing about spread betting tax which is not necessarily right for Forex or any other type of online financial activity (including gambling), is that it’s tax free!

United Kingdom is the first to legalize gambling and make it more established and institutionalized, this is the reason most of the financial activity do carry a tax. Mostly this tax is paid by the service provider (the company who provide the financial services and usually the one to make most of the profit), however spread betting in the United Kingdom carries no tax.

This is one major reason Spread betting is highly popular in the UK, even more than Forex. If we take all known forms of gambling including sports betting which includes horse racing which is very popular in the UK, Spread betting is an activity which can be very profitable in the short term and having no tax make it attractive for players who are not necessarily familiar with the financial markets. Financial markets differ from the sports market. It’s not like betting on a horse or a soccer team to win. In spread betting there are trends which determine the growth and or rise of one product in comparison to another and there are many factors determining for example if the oil price will rise or drop, or if the Euro will grow strong compared to the Japanese Yen.

It’s not just reading and analyzing the financial spread betting tax columns in the daily newspaper or online, it understands the meaning of a spread bet and market trends.

There is a word that in the future due to the rising of the financial spread betting tips , the government will place a tax over financial spread betting, some say that even before 2010.

In the meantime financial spread betting is tax free and it’s the best time to start playing online and test your skills without donating a penny to the government – it’s your money and let’s keep it this way.

Start your betting online and make the first bet on spreads right now!

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