Spread Betting Tax Uk
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Spread Betting Tax Uk
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.
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Home / UK Betting Guide – Sports Betting In UK [2022] / Betting & Gambling Tax in the UK – What do you have to pay, and when?
Top Safe & Trusted Betting Sites in the UK in 06 September 2022 – Updated List
10% of profits during the accounting period, minus payouts. If winnings or stakes do not exceed £500 a day, £7,500 every 4-5 weeks, or are for charity, bingo operations are duty-free.
Rates range from 1% to 50%. Companies must pay tax If they hold a UKGC license, or provide premises where gaming is offered. Unlicensed and unregistered companies pay the maximum 50% rate.
Lotteries pay 12% of all stake money in the accounting period.
Land-based games, such as FOBTs (fixed odds betting terminals) are free from duty if the prize is less than the cost of playing. In 2018, then Chancellor Phillip Hammond announced a new 21% tax on FOBTs. However, that tax is only the maximum cap. The actual amount of tax paid depends on the “category” of game. Those in pubs and clubs, typically have smaller stakes and prizes (Category C), than Category B2 (racetracks, casinos, betting shops), and Category B3 (gaming halls, bingo halls), so there is some leeway there.
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One of the few things that casino and sportsbook players seldom think of is if they must pay tax on their winnings.
After all, we’re so used to lotteries typically paying out winnings in tax-free cash; we often forget to think about slots and sports bets.
The question “do you pay tax on gambling winnings in the UK?” deserves a clear and proper answer. That is what we’re aiming to answer with this article.
We’ll look at betting tax in the UK, and if you need to pay gambling tax on UK winnings, either as a foreign visitor or citizen.
We’ll also look at what taxes the UK betting sites must pay, and if that affects you. If you’re eager to know the truth of the matter, let’s dig right in.
The UK gambling industry is a huge business. Many players love to have a punt, and gambling is a significant source of income for the government. In 2022, there are betting tax laws in England and the rest of the UK. However, will you end up paying anything to the government?
The Betting and Gambling Act (1960) was the first bill to legalise betting outlets and bingo halls. By 1968, casinos were legalised, too. All paid the usual levies on revenue, but so did the players. A whopping 9% winnings tax was applied on anything won. The Betting and Gaming Duties Act of 1981 did little to change that. It made things easier for high-street bookies to offer services, and effectively outlawed offshore businesses from advertising to UK players, but did nothing to alter the tax laws.
The first signs of change came in 2001, when then Chancellor of the Exchequer, Gordon Brown, announced the abolishment of the 9% levy. The tax on punters’ winnings was replaced by a 15% tax on bookies and casinos themselves. Brown did this as he feared that the UK Government was losing out to offshore casinos, who were providing their services to UK players without paying any duties at all. It is a move which has since been followed by most other major European nations.
Naturally, many companies shifted their business to Gibraltar, where a 1% levy was in place. However, a 2014 amendment to the 2005 Gambling Act (the one initiated by Brown in 2001), also stipulated that there would be a point of consumption tax on foreign gambling sites catering to UK players. The overriding rule change meant that any operator offering betting accounts to UK players had to pay the same 15% duty as their UK-based counterparts. Broken and defeated, they gave in.
The rest, as they say, is history. Where do the current laws leave you, though? Do gamblers pay tax in the UK, and what are the specific terms? Are gambling winnings taxable anywhere in the UK, or in just specific parts? It is time to look at the current gambling laws in place.
The current gambling laws stem from the same Gambling Act, albeit amended several times. The UK Gambling Commission now has full regulation over the industry, and one of the prerequisites for offering services to players in the UK is that licensed UK operators must have a UKGC license. This naturally means that they must adhere to the 15% levy on revenue, as well as a string of other regulations aimed at promoting responsible, safe, fair and secure gambling.
Anybody in the UK can gamble (via any means) provided they are the legal gambling age. The gambling age in the UK is set to 18 years old. However, does HMRC want you to pay tax on gambling winnings, and what are the current tax laws on betting in the UK ?
To date, betting tax is abolished for all UK players. This means that you do not need to pay tax on anything you win . The UK Government does care if you win £1 or £100 million. It doesn’t matter if you win at football betting sites in the UK (including 5 pound betting sites ) or pocket your prizes via a lottery. UK players do not pay tax on their gambling winnings to the tax authority, HMRC (Her Majesty’s Revenue and Customs).
For instance, if you were to engage in a spot of UK horse racing betting , and pocketed grand national winnings of £10,000, they are all yours. You can transfer them to your bank, and that’s the end of that. The same is true if you win big on lotteries, UK political betting, poker, bingo or any form of gambling game. You can engage in betting tax-free in the UK.
In theory, the tax you would typically pay is already paid when you bet. It is the responsibility of the sportsbook, casino or gambling entity to pay that tax on their revenue. There is nothing you need to do. If bookies choose not to pay their fair share of tax to HMRC, that isn’t your problem.
It is worth noting that if you’re an e-sports player and you land winnings, then it is a different story. If you play in e-sports tournaments and win less than £12,500 per tax year (overall), you do not need to pay tax. If you earn more than £12,500, you must pay tax. This is a flat 20% tax rate. Winnings between £50,001 and £150,000 are taxed at 40%. However, if you make money by betting on somebody else playing e-sports, your winnings are tax-free.
As mentioned, virtually all forms of gambling income are tax-free in the UK. These include winnings from:
Even if you engage in arbitrage betting in the UK, you don’t need to worry about tax. As for UK tax on cryptocurrency gambling, the rules are quite clear. You do not need to pay tax on anything you win when betting with cryptocurrencies. However, you are required to pay income tax on any money you make buying and selling digital currencies if that sum is over £12,500.
Do you get taxed on lottery winnings in the UK? You’ll be delighted to hear that the answer is no. You do not have to pay a tax when you purchase a lottery ticket, either online or in a land-based outlet. Is prize money taxable in the UK, then? No. Nothing you win or pay in relation to The National Lottery or Euro Millions is taxed in the UK.
However, we must point out that if you play foreign lotteries through online lottery sites, the rules may be different. For instance, if you were to play the Mega Millions or US Powerball online, and you won, you will most likely have to pay tax on your winnings in the US as American lotteries are seldom ever tax-free. In a sense, you’ve “made your money” over in the United States. Lotteries which are UK-based are always tax-free, though.
The biggest bookmakers – UK based are required to pay tax. So, too, are betting exchanges in the UK , casinos, bingo sites, poker rooms and all land-based outlets. The UK gambling tax rate varies based on what business is being offered, revenue, and a few other things.
Here is a rough breakdown of UK taxes for gambling enterprises:
You might think that things would work a little different with spread betting in the UK. After all, spread betting does not offer fixed odds, as such. Instead, punters are wagering on outcomes, and it is arguably a more dangerous way to bet. Here’s how it works:
A cricket betting UK bookmaker offers you a spread bet which states that England will beat Australia and score between 350 and 360 runs. You believe it will be 400 runs.
You “ buy ” the spread bet for £1 (at 360 runs). If England scores more, you will get £1 (your stake) for however many runs England accumulate over 360. However, you will lose £1 for every run under 360.
Alternatively, you could “ sell ” the spread, which works the same way but in reverse. You’ll make your stake (in this case £1) for every run under the spread and lose your stake for every run over 360.
As you can see, there is a lot of risks involved with spread bets, but there is also a lot of upsides. Fortunately (if you like that sort of thing), there is no capital gains tax on spread betting, as with other gambling games.
There is an exception made for e-sports gameplay, but not e-sports betting . Playing e-sports can see you taxed on winnings over £12,500 from tournaments. However, using CSGO betting sites in the UK to wager online will see you net any winnings tax-free.
If you have questions remaining, we’ll try to answer them in our easy to read FAQ guide. Let’s begin…
Casino software developers (the producers of slots and games) get taxed on any income they make, like other businesses. They also must pay for gambling licenses in some cases. However, they don’t have to pay taxes on revenue from stakes, like operators.
No. The UK doesn’t differentiate between games of skill and games chance.
It doesn’t matter whether you play with the best betting app in the UK or a terrible one. There are no taxes on mobile winnings.
Again, that depends on where you reside. Some countries (like those listed above) don’t tax winnings from gambling. Others have small tax-rates, and some will whack you with massive tax rates. It varies, so you need to look these up for where you reside.
No. Claiming no deposit betting UK bonuses and free bets or participating in any betting offers in the UK won’t see you charged a tax.
It doesn’t matter if you win £1 or £100 million. You won’t pay taxes in the UK no matter how much you win. The only exception is if you’re an e-sports player who engages in tournaments and wins. Then there is a tax on winnings over £12,500 per year.
This gambling tax law has been decided by the UK Parliament. It is a law which covers Scotland, too.
Taxes on savings is a different matter. There are separate tax rules for savings. Once you put money into your savings account, you are subject to the tax rules on savings. It doesn’t matter whether this money came from gambling or other avenues.
Again, the rules regarding gambling tax were decided by the UK Parliament. This means that it covers the entire United Kingdom. Each part of the country does not have its own gambling tax law.
No, at least not in the UK. If you live in one of the several countries listed above, you don’t need to pay tax. However, if you live elsewhere in another country, you will need to check the gambling tax laws of your country.
For the time being, the United Kingdom is focused more on promoting responsible gaming, than altering tax laws. The current tax laws seem to work fine, and most operators are content with it.
There was talk of operators leaving the UK market over Brexit, but that is folly. UK punters love to gamble. No operators will risk leaving one of the most valuable gambling markets in the world. The UK Government wants revenue from gambling and needs UK punters to bet, so they aren’t like
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