ForexSpread betting in the UK: a forex trader's guide
Spread betting is a way for UK and Irish residents to trade price movements in currencies and other markets. You stake an amount per point of movement instead of buying a number of units, and profits are currently free of UK capital gains tax for most individuals.
How a spread bet works
You choose a stake per point, for example £2 per point on EUR/USD, where a point is usually 0.0001 for that pair. If you buy at 1.0850 and close at 1.0880, the price has moved 30 points, so you make £60 before costs. A move the other way loses the same amount. See what a pip is.
The broker's spread is built into the prices, and positions held overnight are charged a financing fee.
Tax treatment
HMRC treats spread betting as gambling for most individual traders, so profits are currently not subject to capital gains tax or stamp duty and losses cannot be offset against other gains. Treatment can differ if spread betting is your main source of income, and tax rules can change. Check with HMRC guidance or a tax adviser for your situation.
Regulation and limits
Spread betting firms must be authorised by the FCA. The same retail protections that apply to CFDs apply here, including leverage limits of 30:1 on major currency pairs, a 50% margin close-out rule and negative balance protection. See UK forex leverage limits.