Your guide to tax-free Spread Betting & Trading!
Following on from our post – ‘Is Spread Betting tax free? The reasons why.’ we bring you our list of Spread Betting perks and our favourite Spread Betting Platform. Many will warn you that Spread Betting is a dangerous way to trade, however, if you trade with money you can afford to lose and minimise leverage usage, you have access to a platform that is able to offer many advantages over standard share-dealing accounts!
What is Spread Betting?
Spread betting is a type of trading where the trader can ‘bet’ the direction that they expect the stock to move, the terms used for this are short; which is to bet the stock price will move down, and long; which bets that the stock is going to go up.
The ‘betting’ aspect of Spread Betting is that each bet has a time frame attached to it, whereby the trade will expire at the defined date, this is the key difference between this and other trading types, and is the reason some people may consider it a dangerous method to trade, however, the general expiry of a ‘bet’ can be a number of years, so the risk associated, is minimal.
Other advantages to Spread Betting are that it’s completely tax free! This is probably it’s biggest advantage and if utilised correctly, can be incredibly rewarding!
Exempt to Capital Gains Tax – This is one of the largest advantages to Spread betting, you can trade until your hearts content, knowing that every penny you make, goes directly into your pocket.
Exempt to Stamp Duty – Generally, share trading comes with a rather hefty 0.5% stamp duty tax on every transaction, however, Spread Betting is fully exempt!
Zero Commission – To go along with the tax perks, you also don’t need to pay commission. This would mean that any shares you buy don’t have any hidden fees – the price you see, is the price you buy for.
Access to Leverage – Leverage is essentially borrowing money that you are allowed to trade with, so for every £1 you have as funds you may have up to £5 to use. Leverage can amplify potential gains by up to 5x, however, it can also cost you up to 5x more, so use carefully!
Ability to Short or go Long – A key difference between share dealing and Spread Betting is that you have the option to ‘short’ a stock, this means that you can bet a stock is going down, as well as bet that it goes up – this is a great way to manage risk in a trade, especially if you’re unsure if the stock is at the bottom of the pit!
Our Favourite Spread Betting Platform
IG is one of the UK’s largest Spread Betting provider, a 2020 multi-award winner, including ADVFN’s 2020’s best financial app.
Access to leverage
Generally, IG gives you a 1:5 ratio on all main tradeable stocks, this would mean that you would have £5 to play with for every £1 you add to your account.
Ability to go either Short or Long on a stock
Being able to create plays in either direction can be a huge advantage that standard share dealing doesn’t offer, for example, if you’re unsure if the stock is at the bottom of a pit when initiating a swing trade, you can cover your long position with a short position, allowing any further dips to become profitable.
Out of hours trading on 70 US stocks!
This can be an amazing perk when fully utilised. Watch out for quarterly reports before and after hours, then go long or short!
Zero commission – this is covered in the Spread
This can play to your advantage when dealing in small amounts, for example, many share dealing platforms have commission associated with each share dealing, no matter the size, so you may want to invest £50 but then find that there’s a £8 commission attached to it.
Your balance is the maximum you can lose
You can trade in a safety net that ensures that you don’t lose more than your account balance.
How to get started
Getting yourself Spread Betting is very simple –
- Sign up to ig.com
- Head to ‘My Account’
- Under ‘Spread bet’
– Add funds (enter desired amount)
- Once funds have been added you can then ‘open platform’
- You are now ready to start trading!