Are all my spread bet profits tax free?

morgan_edge

Well-known member
373 93
At the moment it is all tax free whether or not it is your sole source of income. The only snag is whether it is associated with a related activity - such as selling trading tips, for example - when the spread betting may be deemed to be part of an overall business activity and thus taxable.

Even then it's unlikely, unless anyone is really coining it, because HMRC gain much more from the betting tax applied to SB companies than they would gain from their clients if they taxed any income derived when they'd have to allow losses to count against taxable income.

X2 (y)
 

Strugglingtrader

Active member
147 9
Hi ST

If you do have an income and a job that takes up most of your time - say over 20 hrs a week and whether you earn say £13K per annum or £50k p a - and you pay tax on it - and its not trading - then your spread betting on trading is tax free

I got in trouble when i tried to place more of my profits through spread betting - whilst still paying tax on other income that was via FX trading - but was not via a spread betting company.

Unfortunately I was already in the black books of the old IR and was therefore regularly investigated ever approx 5 yrs going back from my first investigation in the mid 80's when with penalties and interest they settled for just under £30k after initially claiming I had underpaid nearly a 6 figure amount.

As long as you are not already on their hit list - and already paying your tax and not living in a £2 million house and driving a Bugatti - you should be OK.

If spread betting is your only income/ work and you make over say £12 / 15k per annum per year from it - then by rights you are a professional trader / gambler and will be taxed on it.

With regards to your returns - up to 50%+ per month can be earned by just using stake size under say 3% max of your capital - that's if you an experienced intraday multi trader with years and 1000's of live trades behind you.

If you are using stake sizes over say 7% -say 10 to 15% of your capital for every trade then you are riding on luck - and maybe an accident is awaiting to happen.

OK you might make 3 or even 5 months - but very much doubt on say 10%+ stake size your luck will last 6 months or a couple of years etc - as a bad run of consecutive losses will - or could ruin the account completely.

By the way - is your story true ? - or is it an old member on another "wind up"

Good Trading

Regards

F

Dear Sir,
Thank you so much for replying to my post. I actually tried to contact you through another (similar) thread and have been reading through a lot of your posts.
I really appreciate your thoughts and guidance.
My story unfortunately is very true, I've had a very tumultuous career and could not understand why I have had such a path till I was let go again just before Christmas. I've actually been very successful as a quant analyst, day trader and most recently raising very large sums of money ($£400m from one of the largest swf), but despite all the successes I could never make it as a company man. I'm at the point in life where it will be very hard for me to get a job again so I went to spread betting.
I have friends who are hedge fund managers (Global macro with an equity long bias), but I can't speak to them about spread betting as they are operating at a different level.
I would be grateful for any guidance. With respect to the stake size under say 3% max of your capital. Do you mean if my account size is let's say £25,000 then my stake should be no more than £750 per point?
Also if I were to move offshore to a tax free jurisdiction, wouldn't then all the profits I make from spread betting be tax free?
I know it's going alright now and I'm probably running ahead of myself, but I just feel this is my last chance and I really want to get things right.
Thank you in advance.
Sincerely,
ST.
 

itspossible

Senior member
2,796 569
Many thanks for your kind words. It is indeed difficult to understand why things happen, but hopefully they lead to better things.

I have been day dreaming sometimes that if things stay this way I would like to manage money as I have been in investment management since 1996, but I ended my dream by concluding that I can just manage my own money without the regulatory headaches. I don't feel a need to report to the tax authorities if it isn't required, I'm just wondering if an income of £20,000 a year from other sources (BTL) will be accepted by the tax authorities against an income of potentially £200k from spread trading?
:whistling-£200k from spread betting
Ricardo_Montalban_Herve_Villechaize_Fantasy_Island_1977.JPG
 

Strugglingtrader

Active member
147 9
are those returns actual ?...........

although I admire people planning ahead - personally I say don't worry about paying tax on profits until you are kicking regular butt ...........life has a habit of not turning out as you hope ...worry about making regular money first on a decent platform ......

good luck

N

Many thanks for your comments, so far the returns are accurate but I know that I am only one bad trade away from humility. Been doing this for sometime on and off and still have my heart in my throat, but it's all my money which makes a big difference, as I can't live with myself for losing other people's hard earned money.
 

Splitlink

Legendary member
10,850 1,234
Thank you for commenting on my post. Could I ask you why you would be prepared to pay 20% the government? I'm probably getting ahead of myself (no doubt), but if the trading goes well and you do fall within the authorities interpretation of spread betting profit being a taxable income, would it not be better to move to another country?

I know this is only worth considering when the profits are of some worth, but just wondering.

Peace and quiet. Tax avoidance or evasion makes for a miserable existance, IMO. I have other things to spend my time on. The Spanish are going through a clean up phase. We have innumerable court cases going on, involving some of the nation's most influential people. Jordi Pujol, the Catalan ex-president. He, his wife and seven kids were all at it. Another one is the present king's sister, Cristina.. If you want to go further, check up on Bankia's black credit cards and what Andalucia has been up to was nobody's business--now it is everybody's

No one wants to pay taxes but somebody has to. Jordi Pujol is older than me and he has no desire to die in any other country, except the one he loves. I feel that way, too. The older you get, the more it gets to you.
 

Forexmospherian

Legendary member
39,928 3,301
Dear Sir,

............................

.......................................

I would be grateful for any guidance. With respect to the stake size under say 3% max of your capital. Do you mean if my account size is let's say £25,000 then my stake should be no more than £750 per point?
Also if I were to move offshore to a tax free jurisdiction, wouldn't then all the profits I make from spread betting be tax free?
I know it's going alright now and I'm probably running ahead of myself, but I just feel this is my last chance and I really want to get things right.
Thank you in advance.
Sincerely,
ST.

Hi ST

Just read this part in italics ( see your comment above )

I am amazed if you have been involved in trading for many years and not understand your stake size risk? Normally it is advisable to stay under 2% and lower - but I have only suggested 3% simply because you are supposed to be a very experienced spread better and for the returns you are suggesting should have ways of not having 7 or 10 or more consecutive losses in a row.

The risk though is not per point or pip - but based on the size of your planned exit point if the trade goes against you.

Lets say you have a 25 point stop - then on 3% on £25k account means the £750 risk is divided by your stop size - so in this case you would be betting with £30 per point or pip.

If your stop was larger - lets say 75 points / pip - then you would be betting with only £10 per point pip - so that if you got stopped out you have still not risked more than £750.

I am sure you must know that commercial traders dealing with very large capital account might only be risking very small % stake size ( ie under 0 05 % or lower) and so that's why their returns are so much lower than retail traders who after all are playing a different game. Capital preservation is top priority but if you are say trading a £10k account and are able to make 40 -50% returns per month with a very aggressive strategy - then if you can maintain in with no compounding whilst withdrawing profits - then even if you have a really bad run after month 4 or 6 + - your profits easily out weigh wiping your account .

With regards to spreadbetting and tax again - 95% of all spreadbetters will have no problem - its tax free - simply because most lose money and even the small percentage who win ongoing - already have jobs and therefore pay tax via their main occupation.

Its the very small percentage of full time winners who pay no tax on any other income that are looked upon differently - that's where the grey area is but if its small amounts then it might never be found out - but any full time spread better earning larger annual amount ( ie over $50 / 100k pa) on an ongoing basis - then that's a problem to the HMRC and they have ways to deal with it

GL

Regards


F
 

timsk

Legendary member
7,611 2,383
No, you are wrong FXMO I'm afraid.
+1
The tax free status of spread betting firms is, arguably, the primary reason why their clients use them in preference to other brokers and trading vehicles. It's their 'edge' in the broking world. If they promoted their products as being tax free when in fact they're not then, at the very least, they would be in breach of advertising standards, trading standards and would probably fall foul of the FCA. I've never heard of a spread betting firm getting into hot water with any regulatory body on account of promoting their products as being tax free. All of them do it and, in most cases, very openly and prominently.

This is just one example from ETX Capital:
"One of the advantages of spread-betting in the UK is that profits are tax-free. Since spread betting is currently considered to be a form of gambling by HMRC, no Capital Gains Tax is due on proceeds. This means that if you win you get to keep 100% of your profits, untaxed. However, losses cannot be used to offset taxes."

It's black and white, clear as day. Spread betting profits are tax free.
Tim.
 
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Forexmospherian

Legendary member
39,928 3,301
+1
The tax free status of spread betting firms is, arguably, the primary reason why their clients use them in preference to other brokers and trading vehicles. It's their 'edge' in the broking world. If they promoted their products as being tax free when in fact they're not then, at the very least, they would be in breach of advertising standards, trading standards and would probably fall foul of the FCA. I've never heard of a spread betting firm getting into hot water with any regulatory body on account of promoting their products as being tax free. All of them do it and, in most cases, very openly and prominently.

This is just one example from ETX Capital:
"One of the advantages of spread-betting in the UK is that profits are tax-free. Since spread betting is currently considered to be a form of gambling by HMRC, no Capital Gains Tax is due on proceeds. This means that if you win you get to keep 100% of your profits, untaxed. However, losses cannot be used to offset taxes."

It's black and white, clear as day. Spread betting profits are tax free.
Tim.

Hi Tim

Yes they are tax free to maybe 90 -95 % of all traders - but not 100% and as I have pointed out already in another thread - there is the "grey area "

I had explained in a far amount of detail what happened to me on the other thread started originally by C V.

I will find out the details in the gambling act that allows Tax offices to treat full time spread betters who are not paying tax on any other form of revenues differently.

I had the chance to challenge this through the courts - but both my laywer and accountant advised me not to - due to the costs involved

I do believe there are other cases pending - but have not really looked into more since 2010.

Regards

F

First link worth looking at -

http://www.financial-spread-betting.com/Tax-free.html
 

barjon

Legendary member
10,705 1,809
Hi Tim

Yes they are tax free to maybe 90 -95 % of all traders - but not 100% and as I have pointed out already in another thread - there is the "grey area "

I had explained in a far amount of detail what happened to me on the other thread started originally by C V.

I will find out the details in the gambling act that allows Tax offices to treat full time spread betters who are not paying tax on any other form of revenues differently.

I had the chance to challenge this through the courts - but both my laywer and accountant advised me not to - due to the costs involved

I do believe there are other cases pending - but have not really looked into more since 2010.

Regards

F

First link worth looking at -

http://www.financial-spread-betting.com/Tax-free.html

Hi FXMO

The only grey area is whether any spread betting is regarded as part and parcel of a related business activity where it is possible, but not likely, that it may be regarded as part of the whole and the overall profits taxable.

If your own experience fell into this category, fair enough. Otherwise you were probably badly advised

Cheers
 

Strugglingtrader

Active member
147 9
Peace and quiet. Tax avoidance or evasion makes for a miserable existance, IMO. I have other things to spend my time on. The Spanish are going through a clean up phase. We have innumerable court cases going on, involving some of the nation's most influential people. Jordi Pujol, the Catalan ex-president. He, his wife and seven kids were all at it. Another one is the present king's sister, Cristina.. If you want to go further, check up on Bankia's black credit cards and what Andalucia has been up to was nobody's business--now it is everybody's

No one wants to pay taxes but somebody has to. Jordi Pujol is older than me and he has no desire to die in any other country, except the one he loves. I feel that way, too. The older you get, the more it gets to you.



Thanks for your feedback.
Best.
ST
 

timsk

Legendary member
7,611 2,383
Yes they are tax free to maybe 90 -95 % of all traders - but not 100% and as I have pointed out already in another thread - there is the "grey area" . . .
Hi FoMo,
I think you're coming at this from the wrong angle. Providing links to support your claims would be helpful if they are rooted in fact and provide solid evidence. I've nothing against the site you link to in your last post - but it doesn't do that as far as I can see. If you're correct in your assertion then, somewhere, someone who's been collared by HMRC to pay tax on spread betting profits must, surely, have filed a registered complaint and/or sued their spread betting company? That's the link I'd be interested in seeing and would lend weight to your claim.

As it is, I've never seen on ETX, IG, Capital Spreads etc. anything other than the very clear statement quoted in my last post. If there was any doubt, they would cover themselves with "spread betting is tax free unless it's you're only (or main) source of income" - or something along those lines. Alternatively, "spread betting is tax free to maybe 90 -95 % of all traders - but not 100%." They don't do that and for good reason. Namely, how would a prospective customer of a spread betting company know whether or not they fall into the 90% tax free status or the 10% taxable status? It's a rhetorical question as the answer is obvious. Clearly, they wouldn't know. Spread betting companies would go out of business overnight if they started adding caveats like those to their advertising and marketing campaigns.

If you're going to provide links, do so to customers who have challenged the spread betting companies or filed complaints with advertising standards, trading standards and the FCA for soliciting and gaining clients by making false and misleading claims.
Tim.
 

Strugglingtrader

Active member
147 9
Hi ST

Just read this part in italics ( see your comment above )

I am amazed if you have been involved in trading for many years and not understand your stake size risk? Normally it is advisable to stay under 2% and lower - but I have only suggested 3% simply because you are supposed to be a very experienced spread better and for the returns you are suggesting should have ways of not having 7 or 10 or more consecutive losses in a row.

The risk though is not per point or pip - but based on the size of your planned exit point if the trade goes against you.

Lets say you have a 25 point stop - then on 3% on £25k account means the £750 risk is divided by your stop size - so in this case you would be betting with £30 per point or pip.

If your stop was larger - lets say 75 points / pip - then you would be betting with only £10 per point pip - so that if you got stopped out you have still not risked more than £750.

I am sure you must know that commercial traders dealing with very large capital account might only be risking very small % stake size ( ie under 0 05 % or lower) and so that's why their returns are so much lower than retail traders who after all are playing a different game. Capital preservation is top priority but if you are say trading a £10k account and are able to make 40 -50% returns per month with a very aggressive strategy - then if you can maintain in with no compounding whilst withdrawing profits - then even if you have a really bad run after month 4 or 6 + - your profits easily out weigh wiping your account .

With regards to spreadbetting and tax again - 95% of all spreadbetters will have no problem - its tax free - simply because most lose money and even the small percentage who win ongoing - already have jobs and therefore pay tax via their main occupation.

Its the very small percentage of full time winners who pay no tax on any other income that are looked upon differently - that's where the grey area is but if its small amounts then it might never be found out - but any full time spread better earning larger annual amount ( ie over $50 / 100k pa) on an ongoing basis - then that's a problem to the HMRC and they have ways to deal with it

GL

Regards


F


Many thanks F for coming back to me.
I've traded L/S Equities, Vol and convertible arb but spread betting as you know is different. No diversification very focused trades, but you're right I won't be going over 3%.
I think from a tax perspective I will see how things go till April and then make a decision on the viability of doing this in the UK.
Thanks again and hope we connect sometime again when there is something positive to share and I haven't blow up.
Best
ST
 
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Forexmospherian

Legendary member
39,928 3,301
Hi FoMo,
I think you're coming at this from the wrong angle. Providing links to support your claims would be helpful if they are rooted in fact and provide solid evidence. I've nothing against the site you link to in your last post - but it doesn't do that as far as I can see. If you're correct in your assertion then, somewhere, someone who's been collared by HMRC to pay tax on spread betting profits must, surely, have filed a registered complaint and/or sued their spread betting company? That's the link I'd be interested in seeing and would lend weight to your claim.

As it is, I've never seen on ETX, IG, Capital Spreads etc. anything other than the very clear statement quoted in my last post. If there was any doubt, they would cover themselves with "spread betting is tax free unless it's you're only (or main) source of income" - or something along those lines. Alternatively, "spread betting is tax free to maybe 90 -95 % of all traders - but not 100%." They don't do that and for good reason. Namely, how would a prospective customer of a spread betting company know whether or not they fall into the 90% tax free status or the 10% taxable status? It's a rhetorical question as the answer is obvious. Clearly, they wouldn't know. Spread betting companies would go out of business overnight if they started adding caveats like those to their advertising and marketing campaigns.

If you're going to provide links, do so to customers who have challenged the spread betting companies or filed complaints with advertising standards, trading standards and the FCA for soliciting and gaining clients by making false and misleading claims.
Tim.

Another example in another unrelated industry - is mobile phone contracts.

Over the last 5 yrs - the small print as had to go through a lot of change - after the big advertising campaign - say - FREE UNLIMITED TEXTS

This was also challenged in the courts after parents had bills on the children's mobiles after they had racked up over 2 or 3000 texts in the month

Free unlimited texts applied to yet again maybe 80 -90% of all phone users - but the line providers protected themselves by setting limits and in most cases in became free up to 2000 texts up to 30 days . Texts 2001 and 2050 might then cost you a £1 a text or something daft.

All spreadbetting companies will in their small print protect themselves - quite easily - because regulations can change quite quickly.

It is not in the interest of the UK government to tax spread betters or gamblers as long as over 75% continue to lose. If this was to change over the next 2 -5 years - which I very much doubt will happen - then it may be reviewed again.

I had advice of a tax expert at KPMG in Birmingham - along with a friend who worked at Grant Thornton - both very large reputable accountancy firms.

My situation was complex and far from the ordinary - not helped by my previous run ins with the old IR offices from the late 80's.

As I am sure you know Tim - nothing regarding tax laws is 100% black or white - in fact it reminds me of trading in that sense ;-)

Regards


F
 
 
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