What is Spread Betting?

I’m based in the United Kingdom. If you are too, start grinning because you are (in my opinion) based in the best place in the World to trade Forex, gold, oil, the Stock Markets…pretty much anything!

Spread betting is gambling…in a good way.

Traditionally when you trade via your chosen platform, your broker uses some of the funds in your trading account to put money on your chosen market. If the market goes the way you expected you win, otherwise you lose. More info at BabyPips here.

The difference with Spread Betting is that when you make a trade, you’re not actually participating in the live markets. Rather the data & charts you see are sort of an overlay of the “real” market data. A simulated system. This means the rules are a bit different.

The spread (difference between ask & bid prices) is usually higher than when trading CFD’s (contracts for difference) which can at first be offputting.

However if you are in a country that allows spread betting (I think only the UK & Ireland) there is one major advantage:

As long as trading is not your main source of income your winnings can be tax free.

There are of course terms & conditions and I would always recommend talking to a professional tax adviser. 

Here is what HMRC has to say on the matter:

BIM22015 – Meaning of trade: exceptions and alternatives: betting and gambling – introduction

BIM22020 – Meaning of trade: exceptions and alternatives: betting and gambling – spread betting

Not all brokers offer spread betting so if you decide to go down this route have a look around and open some free demo trading accounts until you find a broker that offers spread betting on a platform that meets your needs.