Spread Betting Ireland Tax
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Spread Betting Ireland Tax
Do I Have to Pay Tax on Spread Betting?
Key Points: Do you pay tax on spread betting?
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The image of spread betting as a gambling activity is carried on through the way in which spread betting gains are taxed in the UK, and for the purposes of tax, it remains quite a useful association. Remember – spread betting isn’t really gambling insofar as you can legitimately predict the outcome with logic and reason (rather than relying solely on chance or an individual performance), but as far as the UK tax authorities are concerned it’s a straightforward wager. Tax treatment might seem like an ancillary issue, but it’s actually extremely important, and can make the difference between a profitable trade and an unprofitable one, and the favourable tax treatment of spread betting ultimately leaves more of your earnings untaxed.
Financial spread betting is only available in the UK and Ireland – no Capital Gains Tax*, no Stamp Duty, no Income Tax
Spread trading is regulated by the FCA but treated as a gambling activity for tax purposes
In other countries, such as the US and Australia, you would need to use other trading products such as CFDs or futures
To start examining the way in which spread betting is taxed, let’s look at how traditional share transactions are taxed as a basis for comparison. Bear in mind, it is possible to spread bet on the performance of individual shares where offered by your broker, thus it is plausible that you could invest in exactly the same trade in the share and spread betting markets with entirely different results.
A share transaction sees the transfer of ownership in a share, an asset. For starters, shares in the UK are liability to the payment of Stamp Duty, a form of tax that is applied on the total value of a transaction, expressed as a minimal percentage – for example, Stamp Duty for shares sat at 0.5% of transaction size. Particularly for leveraged transactions, this can be a significant tax liability to pay on each and every transaction over the threshold value. Without going too far into the intricacies of Stamp Duty and how it is calculated, this liability can be instantly removed from the equation when dealing with spread betting.
In order to realise a profit on a share transaction, you generally have to resell your shares, and this speculation with the intention to resell tends to be the core reason for most share purchases. This is where the most considerable tax burden comes into play – at the point of disposal. Capital Gains Tax is paid by UK individuals on any gains made on the disposal of capital. Effectively, CGT performs the same function as income tax on capital profits, and is charged at different rates depending on your level of capital and income. Not only is CGT expensive, but it is also highly complicated, and can be a significant administrative burden for traders, not to mention its financial impact.
In spread betting, no assets are changing hands, no transaction is taking place, no assets are being sold. It’s merely an intangible bet, or agreement between the trader and the broker, and it is taxed as a pure gambling activity – that means at a rate of 0%. The exception to the rule is where spread betting forms the core of your day to day income, at which point you will be liable to income tax on your earnings as with any other trade, business or job; in other words, you only pay tax if you run spread betting as a business. However, as a starting point this can save a substantial proportion of your profits from the hands of the taxman, leaving more cash in your pocket at the end of the day.
Assume the rate of CGT (Capital Gains Tax) is 20% and Stamp Duty is charged at 0.5%, (with all other reliefs and allowances exempted for simplicity’s sake). Buy 1000 £1 shares in Company X which you sell for £1.05 would yield a profit of £50, less 20.5%, which leaves £39.75 in profit. With a spread betting transaction on the same shares, you would be more considerably leveraged, earning a 500% return, which in turn would be tax free.
The significant savings afforded by the more preferable taxation of spread betting gains are one of the major pull factors for traders, and particularly when combined with the leverage effect of spread betting, can have a dramatic impact on the profitability of your trading activities.
Question: Are spread bets tax deductible?
Answer: Spread bet profits are tax-free and you get to keep all your profits but you can’t offset those losses against other capital gains. Let’s look at the example below.
Let’s look at the following scenario: you want to sell some equities and make a nice profit of £50,000 but at the same time you had a £50,000 investment in shares of another company which just went bust. In this case, you can offset your capital losses against capital gains, thus you have £0 net capital gain and you pay £0 in CGT.
Same scenario but this time you spread bet on shares: As financial spread betting is tax free, you can’t offset your losses against capital gains and thus you’d still have to pay Capital Gains Tax on the £50,000 profit you make from the sale of equities, even though you actually made no profit from these two transactions.
Question: Is financial spread betting really tax free?
Answer: Yes, this type of trading involves no taxes and you don’t need to report any profits or losses to the HMRC, just like with any other gambling activity.
Question: Is there any tax in the EU or Australia?
Answer: Financial spread trading is only available in the UK and Ireland, in other countries you would need to use other trading instruments such as futures or shares and these products are subject to tax.
Answer: Unfortunately, more than 70% of traders lose money and since spread bet traders can’t offset those losses against capital gains, the taxman in the UK actually benefits from this regime. Also, as spread betting falls under the gambling regime, the taxman collects more tax from your provider.
One of the key advantages of spread betting is that it is taxed accordingly to considerably more favourable rules than other forms of trading. Essentially, spread betting is regarded by UK tax law as a gambling activity, and therefore the profits from spread betting are tax free – i.e., there is no capital gains tax to pay on the earnings generated. Because spread betting is based on asset prices, rather than trading in the assets themselves, it is also exempt from stamp duty, which when added to the CGT savings makes spread betting an even more attractive investment style.
Spread betting can attract tax liability in the instance that it becomes the trader’s main source of income, at which point earnings are subjected to income tax according to the normal income tax laws. However, for the most part spread betting is a potentially highly lucrative, tax free form of trading.
Independent Investor is a news and educational portal covering latest events in the world of trading and investment. Information on this website is for informative purposes only. Between 74-89% of retail investor accounts lose money when trading CFDs, forex, and spread betting. You should consider whether you can afford to take the high risk of losing your money. Independent Investor offers an unbiased and independent broker comparison service, but we may receive compensation from the listed brokers.
Financial Spread Bets (Spread Trading) and CFDs are complex instruments and can come with a high risk of losing money rapidly due to leverage. What are the Differences?
At first glance, there’s little difference between CFDs and Spread Betting.
Both CFD trading and spread trading carry a far higher level of risk than traditional investments and customers can lose more than their initial investment. They are typically used to make short-term trades based on whether you think the price of a particular underlying asset is going to go up or down. Both options allow you to go long (a price rise) or go short (Falling prices). With both CFDs and Spread Trading you can use leverage – so a small deposit can get you a lot of exposure to an underlying asset as well as the possibility of large losses.
The key difference between spread betting and CFD trading is how they are treated for tax purposes in Ireland. Spread Trading/Betting is tax-free in Ireland. Profits from Contracts for Difference (CFD) are liable to Capital Gains Tax More details below on the tax situation.
A CFD is a method that enables individuals to trade and invest in an asset by engaging in a contract between themselves and a broker, instead of acquiring the asset directly. Forex trading is one of the biggest financial markets for CFDs. With a “Contract for Difference” – the trader and the broker agree between themselves to replicate market conditions and settle the difference amongst themselves when the position closes. A Contract for Difference can go in any direction. So you can invest in the possibility of prices going up (a “buy” or “long” order) or down (a “sell” or “short” order), according to what you think is likely to happen. So you can profit from a share price falling.
The main “selling point” , and also the potential danger of CFDs, is they can be used with “Leverage”. For example – with a 20 times leverage you could invest €50 in a CFD – but you would get the returns from 20 times that – ie €1000. You would also risk losing 20 times the loss. You don’t have to use leverage.
Warnings: T he majority of retail customers who buy CFD products on either an advisory or discretionary basis lose money.
Spread Trading (also known as spread betting ) , allows you to speculate on the movement of stocks and shares without using a stockbroker or buying any actual stocks. When you “spread trade”, you choose whether the price of a product or financial instrument (such as a share, stock index, currency pair or commodity) is likely to go up or down, and decide how much to stake on it.
The amount you wish to bet per point of movement in price is your stake . If the price moves in your favour, your profit is calculated by multiplying your original stake size by the number of points the share or currency has moved. If it goes against you, your loss will be calculated in the same way.
An example is given later in the article. You need to be aware that Losses can exceed deposits. Spread betting is free of CGT and Stamp Duty in Ireland
Trade Nation is a trading name of Finsa Europe Ltd, a financial services company authorised and regulated by the UK Financial Conduct Authority. Trade Nation accepts clients from all over the world Trade Nation say that they are “ all about helping beginners get to grips with trading and breaking down complex jargon so it’s easy to understand.” They do have plenty of useful information and guides for beginners and you can set up a free practice account before you progress to a trading account.
There are no commissions or fees to pay. (They make money from the difference between the buying and selling prices of each product.)
You can deposit and withdraw for free by bank transfer, credit card, and electronic wallet. You can use Euros as your base currency.
Note- 81% of retail investor accounts lose money when trading CFDs with this provider.
Say the share price of a Company is €3.00 and you think it’s going to increase, and you want to take advantage of that price movement. If you bought 1,000 shares in the traditional way, it would cost you €3000. However, if you placed a spread bet on the equivalent of €3000 worth of shares, you might only be required to pay a 5 per cent margin to open the trade: €150 (€3000 x 5 per cent). If the share price then rose to €4.00: your profit would be €1000 in both cases. With your spread bet leveraged trade, however, you’ve only had to put down €150 instead of the full €3000. On the other hand, if the share price had dropped to €2 you’d be down €1000 in both cases.
Yes – Spread Trading or Spread Betting is tax-free in Ireland.
Proceeds from spread betting are exempt from Capital Gains Tax , exempt from Stamp Duty and in most cases, exempt from Income Tax.
All spread trading or spread betting profits in Ireland (and the UK) are recognised as the winnings of a bet, and are exempt from Capital Gains Tax .
Unlike traditional share dealing, there is no stamp duty to pay in Ireland on spread betting .This is because you don’t take physical ownership of the underlying asset.
Incidental profits from gambling activities are not subject to Income Tax in Ireland . Therefore – spread betting proceeds are not subject to Income Tax.
In theory – there could be a scenario where someone is deemed to be gambling as a trade or business and they would be liable for income tax. Revenue has previously said that: – “ If a person is carrying on an activity which has features of trading (frequency of transactions, capital invested, expertise or specialist knowledge) then where a trade is being carried on, the profits are chargeable to income tax.” We believe that if someone is working in another job and their income from spread betting is not their main source of income – then it would be very unlikely that Revenue would treat their spread betting as a “trade”.
Profits from Contracts for Difference (CFD) are liable to Capital Gains Tax in Ireland. in the same way as they are on share trading and trading cryptocurrency .
There is no stamp duty to pay on CFD trades .
If CFD trading is not part of a business or trade – then as far as we understand it – income tax is not payable on CFD profits. However – Capital Gains Tax will apply instead.
If CFD trading forms part of a business or trade – then any proceeds will be included in the income of the business and they will be charged income tax on their overall business profit In such a scenario , where income tax is charged ,then the CFDs will not be liable for CGT.
CFD Trading and Spread Betting in Ireland involves a high risk of losing your money. This content is for educational purposes only and is not investment advice
There is risk involved of course – and it is recommended that you start with a demo or dummy account to try things out. The majority of retail investor accounts lose money when trading CFDs.
Etoro was founded in 2007 and operates in more than 140 countries with over 11 million users. Irish residents will use eToro (Europe) which is regulated by the Cyprus Securities & Exchange Commission. It uses EU passporting rules to allow it to operate across the single market. Etoro currently requires a minimum deposit of just $50 for Irish and UK customers. However, they sometimes increase this at very busy times to reduce the number of new customers.
eToro offers CFD trading with currencies, commodities, indices, stocks, and cryptocurrencies.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
NSbroker is a trading platform that specializes in CFD instruments. It covers a variety of asset classes – such as Forex, precious metals, cryptocurrencies and stocks. NSBroker charges low commission of just 0.05% on crtypto and stocks with a flat rate of $8 on Forex and precious metals. Forex trading is one of the biggest financial markets for CFDs. Clients on NSbroker can trade 40 currencies pairs from the major, minor to the exotic pairs.
NSBroker offers support for third-party trading platform MT5 – this means that you will have access to technical indicators, chart drawing tools, and the ability to deploy automated trading robots. They also offer a free practice account .
NSFX , trading as NS Broker , has their HQ in Malta and has been regulated by the Malta Financial Services Authority since 2012. The MFSA regulation also covers Ireland and other EU countries. They hold a Category 3 Investment Services licence and are members of the Investor Compensation Scheme . (This scheme will compensate investors up to €20,000 in the event of broker insolvency.) . Note – 74% of NSFX Limited’s retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
You believe that Company X will increase in its value over the next week. The current value is €1 per share. You decide to invest in Company X CFDs at €100 with 20 times leverage. With €100 capital on the line, you buy €2000 worth of CFDs – bought with the 5% capital deposit of €100 plus the 95% leverage of €1900. The share value of Company X CFDs rises to $1.20. The profit calculation is (€1.20 x 2000) – (€1 x 2000) + €100. Therefore, the profit portion from the trade is worth (€2400-€2000+$€100)= €500. This represents a 400% gain on the original €100 as a result of a 50% share price increase.
If in the example above – the share price of Company X fell to €0.80 the following would be the outcome: Loss = (€0.80 x 2000) – (€1 x 2000) + €100 = minus €300 . This is a 300% loss on the original €100 as a result of a 20% drop in the share price.
If you are interested in investing in shares without the added risks and charges involved with CFDs – take a look at our comparison of online stockbrokers in Ireland
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Are Gambling Winnings Taxable in Ireland? Bettings were first regulated with the 1960 Betting and Gaming Act, in which a tax was imposed either on stakes or winnings in high street betting shops. This was charged at a whopping 9% for punters. It was abolished by Gordon Brown in his March budget of 2001. Let’s find out – Are Gambling Winnings Taxable in Ireland?
This taxon gambler was replaced with a 15% tax on bookmakers and their total profits at the point of supply instead. This meant that if a bookmaker wasn’t based in the UK. This was a deep concern for Brown, who feared that the UK was losing revenue to offshore gambling sites.
In fact, more and more bookmakers shifted from online operations offshore where they would only have to pay the local tax rate on profits—this was capped at 1% in Gibraltar!
This all changed with
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