Forex traders in the UK must choose between spread betting and contracts for differences (CFDs), both granting access to global markets and leveraging capabilities. Spread betting involves wagering on price movements without owning assets, while CFDs are agreements to exchange price differences, offering precise position sizing. The tax implications vary significantly; spread betting is deemed tax-free as HMRC classifies it as gambling, exempting traders from income tax and capital gains tax. By comprehending these aspects, traders can align their strategies with their tax scenarios for better financial outcomes.
CFDs refer to formal agreements between the broker and the trader, allowing the exchange of the difference between the opening and closing prices of an asset.
Spread betting is considered tax-free in the UK, treated as gambling by HMRC, resulting in exemptions from income tax, capital gains tax, and stamp duty.
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