Spread Betting with FXCM, enjoy tax free benefits

What is spread betting and how does it work?

As a Uk resident, Spread Betting is your gateway to the financial Markets. Spread bettors enjoy tax-free proceeds and the opportunity to profit from rising or falling markets―all without having to assume ownership of any assets. In addition, spread bets are traded commission-free and with leverage. If you're interested in trading forex currency pairs, commodities, shares and indices, then spread betting with FXCM is certainly worth a look.

The benefits of Spread Betting

Profits are tax-free1
No stamp duty to pay
No commission3
Trade on rising and falling markets
Open larger market positions using leverage2
Trade hundreds of financial instruments 24/5

When you spread bet with FXCM, you enjoy:

  • Multiple platforms and mobile apps
  • Smaller bet sizes (from 7p a point)
  • Award-winning customer support

With spread betting, spreads include a mark-up, but there are no commissions to pay—all trading costs are built into the spread. CFD-trading accounts are charged commissions.

This, in addition to the tax advantage, is why many UK residents choose to spread bet instead of trading CFDs.

Still undecided? Find out more about CFD trading.

Concept Of Spread Betting

Spread betting is a form of derivatives trade centered on speculation pertaining to the future pricing volatilities facing a specific asset class. Simply put, it is a financial tool that enables traders and investors to capitalise upon a forthcoming move in a security's price without having to own the security.

The concept of a "spread" has a great deal of relevance to a spread bet's function. Essentially, a spread is the difference between the bid and ask price of an asset, or the prices in which a trader may buy or sell a security on the open market.

Current supply and demand forces determine the magnitude of the bid/ask spread, influenced by liquidity providers, independent retail traders and institutional investors. As buyers and sellers interact within the marketplace, the process of price discovery ensues. This interaction influences the spread, evolving price action to a state of equilibrium.

Active traders find spread betting to be a straightforward and useful way of engaging the capital markets. If price is expected to rise over a given period, a trader can simply join the bid; if price is projected to fall, then joining the ask may be ideal. The flexibility, available leverage, market diversity, and ease of trade are key advantages enjoyed by spread bettors.

FAQs

Could I profit from spread betting?

If your prediction of whether the market will rise or fall is correct, you will be gaining a profit and if it's incorrect, then you will incur a loss.

As a trader you should keep in mind that all forms of trading carry risk and although spread betting provides opportunities for profit however you could also incur losses. Thatt's why you should never risk more than you can afford to lose.

How are spread bets taxed?

Spread bets are Tax Free. Normally, when you buy and sell shares you have to pay stamp duty and capital gains tax on profits that you make however spread bets accounts are are tax-free. Also, since you are not owning the underlying adder then you don't have to pay the stamp duty either.

I have an account with FXCM, how can I transfer it to a Spread Betting Account?

If you are currently an FXCM account holder and would like to request an FXCM Spread Betting account, you can do so by clicking the form here.

What is the difference between spread betting and CFDs?

Spread betting is a strategy where traders speculate on the future direction of a market, whether it will rise or fall whereas a CFD is a type of derivative product that allows buyers and sellers to exchange the difference between the present price of an underlying asset and the price when the contract is closed.

Can I spread bet without leverage?

You will not be able any position without Leverage. It is important to be aware of how leverage works and the risks accompanied by it before you take a decision to trade. For more information about leverage and how it impacts your trade please click here.

Spread Betting In Action

Assume that a new currency trader holds conviction that the EUR/USD is going to rise from a current level of 1.1200. In order to benefit from the perceived opportunity, the trader contacts a spread betting firm and is quoted a spread of 1.1200/1.1203. The transaction is then executed accordingly:

  • A long position is opened at 1.1203
  • Leverage is implemented at £1 per pip
  • The EUR/USD rallies to 1.1210
  • The proposition is exercised at 1.1210
  • Profits are calculated and realised, 7 pips * £1 per pip = approximately £7

Of course, in the event that the EUR/USD fell 7 pips from entry, then a loss of £7 is sustained.

Want to start trading cryptocurrencies? FXCM offers a range of crypto CFD products including BTC/USD, ETH/USD & LTC/USD. Find out more about trading with FXCM.

Cryptocurrency products are only available to Professional and Eligible Counterparty Clients.

Disclosure
1

Tax Treatment: The UK tax treatment of your financial betting activities depends on your individual circumstances and may be subject to change in the future, or may differ in other jurisdictions.

2

Leverage: Leverage is a double-edged sword and can dramatically amplify your profits. It can also just as dramatically amplify your losses. Trading foreign exchange/CFDs with any level of leverage may not be suitable for all investors.

3

Compensation: When executing customers' trades, FXCM can be compensated in several ways, which include, but are not limited to: spreads, charging fixed lot-based commissions at the open and close of a trade, adding a markup to the spreads it receives from its liquidity providers for certain account types, and adding a markup to rollover, etc.

Hypothetical/Simulated Performance: These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Simulated or hypothetical trading programs are generally designed with the benefit of hindsight, do not involve financial risk, and possess other factors which can adversely affect actual trading results.

Spread Betting: FXCM UK offers tax exempt spread betting accounts exclusively to UK residents. Residents of other countries are NOT eligible. Spread betting is not intended for distribution to, or use by any person in any country and jurisdiction where such distribution or use would be contrary to local law or regulation. The UK tax treatment of your financial betting activities depends on your individual circumstances and may be subject to change. Spread Betting accounts offer spread plus mark-up pricing only. Spreads are variable and are subject to delay.

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