Are profits from spread betting always free of tax?
It's well known that spread betting profits are free of tax. This is because for tax purposes spread betting profits are classed as as income arising from gambling activities. As gambling income the profits would therefore be fully exempt from UK income tax, national insurance and Capital Gains Tax ('CGT').
A common question is whether this tax exemption applies only if you are not earning your sole income from financial spread betting. So in particular does an individual have to have a PAYE job or be self employed in another (taxable) capacity for financial spread betting profits to be tax free and if so is there any limit to the tax free amount?
Well the answer to all of this is simply no. You can still get the tax exemption for spread betting profits even if spread betting is your sole income, just as a professional gambler wouldn't be taxed.
Of course the corollary to this is that there is no tax relief for losses, and HMRC policy is that gamblers traditionally lose (so they're effectively potentially preventing sizeable loss relief claims).
So when could you be taxed as a spread better?
Well the circumstances are pretty narrow, but simply placing bets via spread betting account, even if you use an organised system to limit risk etc would still not be taxed.
One instance where tax could be due is if you were offering services connected to the spread betting.
For instance assume you start to offer a service to friends and family whereby you provide them with a start up fund and then hand-hold them through the spread betting process with all profits generated being split on a 50/50 basis.
You may obtain 30 people to work with and the profits arising to you could be substantial.
In this case the new activity which appears to involve offering services (the benefit of your expertise?) to other people in exchange for a share of the profits would need to be considered as to whether the profits also arose from gambling/spread betting.
Acting as a 'punter' and placing bets would not usually be taxed, however an organised activity to make profits out of the gambling public will normally amount to trading.
There is no straightforward guidance in the legislation or in previous cases as to when gambling becomes a trade. On the one hand you could be viewed as simply betting but on a larger scale, with your activity completely different to that of a bookmaker or other gambling trader.
However there is no doubt that this is an organised activity, and that the profits arise from the gambling activities of your customers.In this respect your profits arise not from gambling but from the provision of expertise to your customers, and as such could be taxed as trading income.
It's well known that spread betting profits are free of tax. This is because for tax purposes spread betting profits are classed as as income arising from gambling activities. As gambling income the profits would therefore be fully exempt from UK income tax, national insurance and Capital Gains Tax ('CGT').
A common question is whether this tax exemption applies only if you are not earning your sole income from financial spread betting. So in particular does an individual have to have a PAYE job or be self employed in another (taxable) capacity for financial spread betting profits to be tax free and if so is there any limit to the tax free amount?
Well the answer to all of this is simply no. You can still get the tax exemption for spread betting profits even if spread betting is your sole income, just as a professional gambler wouldn't be taxed.
Of course the corollary to this is that there is no tax relief for losses, and HMRC policy is that gamblers traditionally lose (so they're effectively potentially preventing sizeable loss relief claims).
So when could you be taxed as a spread better?
Well the circumstances are pretty narrow, but simply placing bets via spread betting account, even if you use an organised system to limit risk etc would still not be taxed.
One instance where tax could be due is if you were offering services connected to the spread betting.
For instance assume you start to offer a service to friends and family whereby you provide them with a start up fund and then hand-hold them through the spread betting process with all profits generated being split on a 50/50 basis.
You may obtain 30 people to work with and the profits arising to you could be substantial.
In this case the new activity which appears to involve offering services (the benefit of your expertise?) to other people in exchange for a share of the profits would need to be considered as to whether the profits also arose from gambling/spread betting.
Acting as a 'punter' and placing bets would not usually be taxed, however an organised activity to make profits out of the gambling public will normally amount to trading.
There is no straightforward guidance in the legislation or in previous cases as to when gambling becomes a trade. On the one hand you could be viewed as simply betting but on a larger scale, with your activity completely different to that of a bookmaker or other gambling trader.
However there is no doubt that this is an organised activity, and that the profits arise from the gambling activities of your customers.In this respect your profits arise not from gambling but from the provision of expertise to your customers, and as such could be taxed as trading income.
If your gunna be dumb, you've gotta be tuff.