Greetings,

This is my first post here but I’m after some guidance about spread betting. I am a 35 year old based in the north of England who recently lost their job but has some savings.

For years I’ve followed the stock market doing lots of research and some longer term investing based on fundamental analysis. More recently I’ve been investigating day trading, which has led me here and now I’ve exploring spread betting which appears tax free in the UK?

Do any community members have experience spread betting? Does it work? What do I need to know before putting my money down?

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[Christian HarrisParticipant]

Two articles that should hopefully answer your questions:

https://www.daytrading.com/spread-betting

https://www.daytrading.com/spread-betting/tax-free

 

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[MarkG35]

Useful resources thanks for sharing.

From the page on it being tax free it’s interesting that “Spread betting is viewed as a speculative activity so is treated as gambling rather investing”. Why is it considered gambling more than other types of trading I wonder?

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[Christian HarrisParticipant]

Spread betting, like gambling, is a speculative activity with inherent risks.

Unlike traditional investing, where you own an asset, spread betting involves wagering on price movements without ownership.

The accuracy of these predictions determines profits and losses and can fluctuate rapidly due to leverage.

There’s also a substantial risk of losing more than your initial investment.

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[MarkG35]

All of that I understand. But could the same argument be made for all derivative like products, futures, options, cfd?

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[Christian HarrisParticipant]

CFDs, futures, and options are generally classified as investment products rather than gambling as they involve financial contracts that derive value from underlying assets.

Also, the regulatory framework for spread betting often differs from other financial instruments.

In some countries, spread betting is regulated by gambling authorities rather than financial regulators, which can impact its tax status.

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[AJ1983]

Spread betting can be profitable but it’s not an easy gig. Managing position sizes and risk is key and so too is finding a firm whose fees won’t gut any returns you do make.

Before putting money down I’d get comfortable in a spread betting simulator. Any good firm will offer one eg Trade Nation.

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[Tommy]

So I would say make sure you have a solid grasp of market dynamics and risk management if you’re transitioning from more passive investing to day trading through spread betting.

You’re right it’s got an enticing tax status because it’s considered ‘gambling’ by the UK tax authorities. However, the leverage you can use with spread bets can result in whacking losses. Fast strategies like day trading also demand excellent emotional stamina to prevent rash trading decisions.

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[Christian HarrisParticipant]

It’s worth noting that while spread betting is free from both Stamp Duty and Capital Gains Tax (CGT) in the UK, HMRC might consider your profits taxable if you trade full-time for a living.

You should consult a good accountant with experience handling traders’ accounts to avoid falling foul of tax laws.

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