Difference between Spread betting and CFDs

[tomorton]

Should be aware of what is the difference between Spread betting and CFDs? Is it important for scalper and long term traders?

SB is not recommended for scalping as the spreads, although not huge, can be too much of an overhead from the limited profit targets. But its rare to find any experienced traders recommending scalping at all for a new trader.

SB is fine for long-term trading with holding periods of 2-20 days.

 

[TRADEMYSTYLE]

The biggest difference is that the profits in spread betting are not taxable while the profits in CFD are taxable.

 

[danielatrader]

The main difference is that CFDs tend to be quoted in the underlying market currency and the great advantage of spreads, of course, is that they do not carry any risk of currency loss unlike cfds.

 

[tomorton]

The main difference is that CFDs tend to be quoted in the underlying market currency and the great advantage of spreads, of course, is that they do not carry any risk of currency loss unlike cfds.

I had not realised this was a difference between the two.

Maybe you want to give a little more information, maybe some examples, of what you mean?

 

[ironjaw]

I can't believe I read all the thread and am still confused lol. If you trade daily as a day trader you pay income tax or if through a company corporation tax, right? CGT only applies if you are classified as causal trader or as investor. This sucks, anyone experienced with ltd setting up with either IB or ii?

 

[tomorton]

I can't believe I read all the thread and am still confused lol. If you trade daily as a day trader you pay income tax or if through a company corporation tax, right? CGT only applies if you are classified as causal trader or as investor. This sucks, anyone experienced with ltd setting up with either IB or ii?

You need to consider the means of access to the market also. Financial spreadbetting is exempt from personal taxation in the UK: CFD trading is subject to CGT, whether you are a day-trader or a casual trader.

If you set up a limited company through which you make spreadbetting gains, its possible that you would lose the advantage of personal exemption from taxation on these profits - in effect, the SB gains would no longer be your personal profits, they would be the company's profits, so you might end up paying tax as a result.

 

[postman]

Even I need a clarity on how this tax thing works. Would be great if someone helps.

After 20 years of spreadbetting I have NEVER paid any tax.
Hope that's clear enough!

 

[0FXTrader0]

If you are a full-time trader and the profits from forex trading are your primary source of income, then you are liable to pay the income tax.

https://currency.com/uk-tax-explained-for-forex-traders

 

[0FXTrader0]

If you’re earning a lot from trading and you’re not yet paying tax on your profits, the chances are that HMRC will come knocking before too long.

Do forex traders pay tax? – TaxScouts

So, do forex traders pay tax? As you might imagine, the question isn’t as simple as it sounds. There are varying rules to consider.

taxscouts.com

 

[postman]

If you’re earning a lot from trading and you’re not yet paying tax on your profits, the chances are that HMRC will come knocking before too long.

Do forex traders pay tax? – TaxScouts

So, do forex traders pay tax? As you might imagine, the question isn’t as simple as it sounds. There are varying rules to consider.

taxscouts.com

Well as long as you are Betting and not Trading you're ok.

 

[postman]

If you’re earning a lot from trading and you’re not yet paying tax on your profits, the chances are that HMRC will come knocking before too long.

Do forex traders pay tax? – TaxScouts

So, do forex traders pay tax? As you might imagine, the question isn’t as simple as it sounds. There are varying rules to consider.

taxscouts.com

And the relevant quote FROM the article you linked to.

"Do forex traders pay tax on Spread Betting and CFDs?
The type of instrument that you trade with affects the way that you’re taxed.

Spread Betting, for instance, is classed as gambling. As you don’t own the assets you’re betting on, you’ll not be liable to pay Capital Gains Tax or Stamp Duty on the money you make from it in the UK. "
😃

 

[0FXTrader0]

CFDs you don't own the underlying, The HMRC will tax spread betting if your making substantial profits on a regular basis ie your full time. SB wont cocoon you from tax.

 

[postman]

CFDs you don't own the underlying, The HMRC will tax spread betting if your making substantial profits on a regular basis ie your full time. SB wont cocoon you from tax.

The HMRC may change their rules and START to tax spread betting but they don't at the moment and its made very clear they don't IN the article you linked to.

 

[0FXTrader0]

Trading CFD or SB there are 3 classes HMRC use speculative, self employed, private investor. If its a income your doing on the side or your results are inconsistent its speculative but if its something your doing full time for profit regardless of product used you are liable for income tax

 

[0FXTrader0]

CFDs lower rate CGT is only 10%. But as said if trading FT your liable for income tax

 

[0FXTrader0]

Considering what a risk it is to trade for profit in the first place to then start telling newbies the realistic tax proposition would put them off opening there SB accounts and the Gov getting tax thru the SB companies profits. Once you turn regularly profitable your liable for income tax regardless of what your saying about SB being tax free.

 

[0FXTrader0]

CFDs are not per say charged income tax on: its only when your circumstances are taken into account

 

[1nvest]

CFDs are not per say charged income tax on: its only when your circumstances are taken into account

sometimes its ok to say "I don't know" to oneself

 

[postman]

Trading CFD or SB there are 3 classes HMRC use speculative, self employed, private investor. If its a income your doing on the side or your results are inconsistent its speculative but if its something your doing full time for profit regardless of product used you are liable for income tax

Do you have ANY evidence of a person being prosecuted for not paying tax on gambling winnings?
If not then please stop posting F.U.D in order to drum up business for accountants.

 

[tomorton]

What we're still short of here is a post from a trader who has paid tax on their spreadbetting gains.