What is the likely-hood of spreadbetting becoming taxable?

Id like to hear some spread traders views...

If they figure it out so that the losers couldn't offset their taxable income...

Marto1983 said:

Id like to hear some spread traders views...

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In my view, it is very unlikely that spread betting will ever become taxable. The reason is very simple - more money is lost than is won and if the winning were to be taxable the losses would be deductable.

If you're just starting out you will almost certainly make losses - so don't spreadbet, trade and deduct your losses. When you start to win, bet and save that 40%.

Well the tories will never make it taxable at least... Don't forget Stuart Wheeler is one of their major donors.

Vote Tory!

shadowninja said:

If they figure it out so that the losers couldn't offset their taxable income...

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I suppose anything is possible with this present Government!

Betting and spread betting are the same thing (under law) and because the net cash flow from all types of betting is negative it does not make sense to tax winnings.

The only thing I could see the gov doing is re-introducing the 9% betting tax (payable on winnings) which in my view would cause a huge backlash from the betting industry.

I think spread betting tax is extremely unlikely.

If it is under review for the next budget that might explain why the collection of NI data from individuals by the SB comapnies on behalf of HMRC is being proposed.

If it becomes taxable then will the tax be retrospective is the biggest issue. The implementaion of retrospective road tax is an insight into just how vindictive Gordon Browns government is. This smacks of old labour.

Nut

as an insider I might comment on this one.

when cgt was at 40% nobody really thought that SB would become a taxable instrument so with the current level at 18% i feel that it has become even less likely.

The stamp duty angle (0.5%) is also unlikely to be attacked as this would impact cfd's which are a huge revenue earner for the UK (and the governemnt takes a hefty slice in corporation tax).

On another point if SB became taxable then the SB companies would then dispute the gaming duty levy which is currently at 3% of all client loses. given that 80% of clients lose money the government would then lose 24% (80x3%) of definate taxable revenue (as they take it straight from the SB companies) against a possible 36% (20*18%) if every single winner declared (of course many clients are foriegn) and of course most people have some 6k a year of tax free CGT as well. But they would then lose out on the revenue of the 80% losing clients which could be offset against other CGT liabilities.

Unlikely to happen.. is the short answer

By all means tax the profits, but don't forget that you'd then be able to offset the losses wouldn't you?

So, the short answer must be that it'll never happen!

HTH

Cheers

Mayfly

Hi everyone,

Someone mentioned 40% tax on profits when you trade. I was told when I asked a pro about tax matters when moving from a use of a spread betting platform to a pro platform that you could take profits as dividends. I think that implies you could pay yourself a salary at the same sort of tax rate as your normal tax bands but not pay that 40% capital gains tax. (That's all applicable for the UK). Is there any pro trader here who could explain tax advantages of being a trader vs spread better? Also is it worthwhile becoming a pro trader and spend less on trade execution but more on tax?

amtrader1 said:

Hi everyone,

Someone mentioned 40% tax on profits when you trade. I was told when I asked a pro about tax matters when moving from a use of a spread betting platform to a pro platform that you could take profits as dividends. I think that implies you could pay yourself a salary at the same sort of tax rate as your normal tax bands but not pay that 40% capital gains tax. (That's all applicable for the UK). Is there any pro trader here who could explain tax advantages of being a trader vs spread better? Also is it worthwhile becoming a pro trader and spend less on trade execution but more on tax?

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It depends how often you trade. If you make 100s of trades a year, the extra spread you pay with SB will likely come out more than the tax you save.

CGT in the UK is now very favourable for speculators as its only 18% and you get a tax free allowance of 10K a year. Someone making 50K gains a year will only pay 7K in tax.. even less if they have a joint account with the wife.

So there really isnt much of a tax incentive for active traders doing SB anymore as the capital gains tax is so low.

However for less active traders planning on making big profits, then SB might still have a tax advantage.

Most wannabe traders will be attracted to spread betting due to the lower margin requirement that the bucket shops offer. Its also quicker and less intimadating to open a spread bet account than a brokerage account. So spread betting will always be popular (even if the CGT tax was reduced to 10%, most people would still prefer to spread bet).

As far as the pro trader suggesting dividends.. that would be route to take if the tax man reckons you cant claim your profits are capital gains because you are not a speculator (perhaps you are a market maker or an arbitraguer, in which case 20 or 40% income tax might apply instead of 18% flat rate CGT).

Remember this is gambling and not trading, you never posses the share so as such you are betting on an outcome of an event. This is why I can't see it being taxed. It falls firmly within the boundaries of the gambling industry.

Trading2k said:

It falls firmly within the boundaries of the gambling industry.

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Thats not completely true. The spread bet companies are regulated by the FSA.
That means they fall under the financial services industry as far as regulation goes.
For tax purposes it is considered gambling.

Fixed odds betting on financial markets however is completely within the gambling industry and the FSA are not interested in it.

To my way of thinking its very hard for the UK Gov to Tax spread betting as you don't have a fixed bet. When someone goes down the bookies and put £10 on "Three Legged Wonder" in the 3.15 at Kempton thats it, its settled you know exactly how much to tax the punter has to pay. The only way it could be done in the spread betting world is on the initial amount per point ( £1 per point). I bet it would cost the uk tax man more money to collect than it's worth.

ps
Great markets at the mo. I've never made so much as the past month in all my years dipping in and out.

Sefty

I have often written on this forum, that the likelihood of SB being taxable has increased as some countries in EU regard SB to be financial instrument, thus being liable for taxation. SB is somewhat being regulated trough EU MiFID financial directives, this also add to the chances it will eventually be liable for taxation in the years to come.

its a difficult one, its technically pure betting so how can they tax it without taxing all betting the same?

Jesus, stop spreading your affiliate tag

i'm gonna have to get an affiliate tag- i've probably helped about 10 people sign up to IGindex this year- that's gotta be worth something!

Marto1983 said:

Id like to hear some spread traders views...

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Why not worry about it when/if it actually becomes taxable?

The alternate setup will not take more than a couple of weeks anyway.