Is Spread Betting Taxed in the UK? [2024]

Spread betting in the UK is tax-free, exempt from Capital Gains Tax and Income Tax. This unique advantage makes it attractive for speculative financial market transactions. Understanding its tax treatment is crucial, especially in comparison to CFD trading and traditional investments to ensure effective financial planning.

Introduction

Spread betting, a popular form of financial speculation in the UK, has unique tax implications. Unlike other investment forms, it is subject to different tax rules, especially regarding capital gains and income tax. This article provides an in-depth review of the tax situation for spread betting in the UK, contrasting it with the standard capital gains and income tax regulations.

Tax Status of Spread Betting in the UK

In short, spread betting is currently not subject to tax under UK law in 2023.

  1. Spread Betting is Tax-Free: In the UK, profits earned from spread betting are not subject to tax. This exemption is because HM Revenue and Customs (HMRC) views spread betting as a speculative bet rather than an investment. As a result, spread betting is free from both Capital Gains Tax (CGT) and Stamp Duty, and profits or losses from spread betting do not need to be reported to HMRC​​​​​​.
  2. No Offset Against Capital Gains Tax: While spread betting profits are tax-free, it’s important to note that losses incurred in spread betting cannot be used to offset gains for CGT purposes​​.
  3. Exemption from Stamp Duty: Spread betting is also exempt from the stamp duty tax typically paid on purchasing shares and other assets, as it is a derivative product where no actual asset is received by the trader​​.

 

Understanding Capital Gains Tax in the UK

  1. Rates and Allowances: Capital Gains Tax in the UK is applied to profits from the sale of assets like shares or property. The rates differ based on the asset type and the taxpayer’s income bracket:
    • Higher or additional rate taxpayers pay 28% on gains from residential property and 20% on other assets.
    • Basic rate taxpayers pay 10% on gains (or 18% on residential property), with higher rates applying to amounts above the basic tax rate​​​​.
  2. Tax-Free Allowance: There is a tax-free allowance, allowing individuals to earn a certain amount of capital gains each year without paying CGT.

 

Spread Betting vs CFD Trading: Tax Comparison

  1. Spread Betting: Tax-free for UK residents, not subject to CGT or Stamp Duty. It’s viewed as speculative and not a conventional investment​​.
  2. CFD Trading: While exempt from Stamp Duty, CFD trading profits may attract CGT. Losses in CFD trading can be used to offset capital gains, which is not the case with spread betting​​​​.

Income Tax in the UK

  1. Personal Allowance: The standard Personal Allowance for the tax year 2023 is £12,570, the amount of income you don’t have to pay tax on. This allowance can be smaller for higher-income individuals or bigger with certain allowances like Marriage Allowance or Blind Person’s Allowance​​.
  2. Income Tax Rates and Bands:
    • Personal Allowance (Up to £12,570): 0%
    • Basic Rate (£12,571 to £50,270): 20%
    • Higher Rate (£50,271 to £125,140): 40%
    • Additional Rate (Over £125,140): 45%​​.

Conclusion

In summary, spread betting in the UK offers a unique tax advantage as it is exempt from both Capital Gains Tax and Income Tax. This tax-free status is a significant benefit for spread bettors, making it an attractive option for those looking to speculate on financial markets. However, it’s crucial for traders to understand that this tax exemption applies only as long as the activity is not considered a professional trade. For other investments, understanding the applicable CGT and income tax rates is essential for effective financial planning. As with any financial activity, it’s advisable to stay informed about the current tax laws and seek professional advice if necessary.

New Providers
TradingView

TradingView is one of, if not THE, most popular trading platform in the world. They offer an incredible range of indicators & markets with great customizable indicators through their easy-to-learn PineScript language.

Pepperstone

Trusted, Australian-Based Broker 
Excellent user experience with commonly used software options MT4, MT5 & cTrader 

SpreadEx

Fantastic customer service coupled with a wide range of markets, UK-based and also offers sports betting options.

ActivTrades

ActivTrades, established in 2001 is a multi-national company with their own proprietary trading platform.

FxPro

Founded in 2006, FXPro is a global company that excels in forex / currency trading and has won numerous international awards