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How to trade tax-free: spread betting
CFD trading has a close cousin you may not know about … spread betting.
Just like CFD trading, spread betting allows you to speculate on the future direction of a market's price without owning the underlying asset.
Key advantages include:
Tax efficiency: Profits from spread betting are free from UK Capital Gains Tax*. Similar to CFD trading, there is also no stamp duty to pay. However, it does mean when spread betting, you can’t offset any losses against other capital gains.
Leverage: Spread betting allows you to control larger positions with a smaller amount of capital, amplifying potential profits but also potential losses - necessitating careful risk management.
Wide range of markets: You can go both long and short 1000s of markets, including stocks, commodities, forex, and indices.
Simplicity and clarity: Calculating your P&L from a spread bet is straightforward. Simply multiply the wagered amount by the per point movement in price. This simplicity makes spread betting accessible to traders of all experience levels.
For example, if you buy £1 per point of Wall Street at 39000 and later that day sell it at 39400, then you make 1 x 400 = £400 profit. Conversely, if Wall Street falls 400 points to 38600, you lose £400.
Sound familiar? Spread betting and CFD trading are very similar methods of trading financial markets but, importantly, may be taxed differently.
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
Just like CFD trading, spread betting allows you to speculate on the future direction of a market's price without owning the underlying asset.
Key advantages include:
Tax efficiency: Profits from spread betting are free from UK Capital Gains Tax*. Similar to CFD trading, there is also no stamp duty to pay. However, it does mean when spread betting, you can’t offset any losses against other capital gains.
Leverage: Spread betting allows you to control larger positions with a smaller amount of capital, amplifying potential profits but also potential losses - necessitating careful risk management.
Wide range of markets: You can go both long and short 1000s of markets, including stocks, commodities, forex, and indices.
Simplicity and clarity: Calculating your P&L from a spread bet is straightforward. Simply multiply the wagered amount by the per point movement in price. This simplicity makes spread betting accessible to traders of all experience levels.
For example, if you buy £1 per point of Wall Street at 39000 and later that day sell it at 39400, then you make 1 x 400 = £400 profit. Conversely, if Wall Street falls 400 points to 38600, you lose £400.
Sound familiar? Spread betting and CFD trading are very similar methods of trading financial markets but, importantly, may be taxed differently.
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
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