What Is Spread Betting?

What Is Spread Betting?

Spread betting is tax free and is not included as something worthy of capital gains. Spread Betting is for people based In the UK so if abroad, in America for example, you cannot use it.


All profits from spread betting are tax free. One thing which must be stated is that laws can change and as of this article it is still tax free.


Spread Betting Explained


Financial spread betting is a way to speculate on financial markets. Unlike fixed-odds betting, the amount won or lost can be unlimited as there is no single stake to limit any loss. However, it is usually possible to negotiate limits with the broker.


The concept of spread betting is very clear and simple. If you think the market your are analysing is set to rise in price, you buy (the offer price), or if you think the market will fall, you then sell the respective market (the bid price). Your position in spread betting is considered a bet and therefore free from capital gains tax.


This means you never actually own the instrument you are buying, it is all electronic. The difference between the bid and offer prices is known as the spread.


The spread is a small amount your broker takes on each trade taken as a charge. This is the only charge you get from spread betting. Spreads vary from broker so obviously searching for brokers with the tightest spreads is something to look for.


Spread betting is a leveraged product and this means that your initial deposit payment gives you exposure to a much larger portion of the market than if you bought the instrument directly from a stockbroker. This means that spread betting may result in losses far greater than your initial deposit.


If you lack good money management you can lose large amounts of funds. You must therefore understand the risk and learn how to manage your portfolio effectively.


To find out more about Spread betting, Trading forex and making consistant gains click here