They do say that there are only two things certain in life: death and taxes!  So how wonderful is it that Financial Spread Betting profits are completely free from taxation?  No income tax, no capital gains tax, and no Stamp duty! In this short article we look at the facts and see what it can mean to a canny Spread Betting trader who is spread betting FTSE stocks.

Consider a trader buying 10,000 RBS shares at 40p per share. His total investment through equity purchase would be £4,000, plus £20 stamp duty and £10 share dealing costs.  If he sells at 45p, he nets £4,500 less original cost, stamp duty, and two share trade execution costs, a profit of £460.  If our investor has used up his CGT allowance, he is paying tax at his marginal rate on this profit. That could easily be 40%, reducing his profit to £276.  That represents a return of 6.9% on the £4,000 investment. But what is the case with Spread Betting?

The same deal on a Financial Spread Betting basis, where the spread might be 39p – 41p would look very different. £100 per point gives the same potential investment (ie share price goes to zero, loss £4,000), but the increase of 5p noted above results in a profit of £400.  There is no commission, stamp duty or tax, resulting in the profit figure of £400 being the final bankable amount, a massive increase of 45%.  And considering that the margin required to cover this bet would likely require only £800 cash deposit.  So then the £400 profit represents a return of 50% on the £800 invested.