Investors normally have to worry about three taxes on their transactions.
First off there's income tax on dividends, bond coupons and interest. This is levied at rates up to 50% from this April for high earners.
Next there's the tax on any trading profits, called capital gains tax. This is now charged at a flat rate of 18% of any gain (the difference between what you pay for an investment and what you eventually sell it for). However you do get the first £10,100 tax free as an annual allowance from HMRC.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Finally there's the registration tax, stamp duty, levied at 0.5% on the buyer of shares.
The great news aboutspread bets is they are income and capital gains tax-free for investors (although watch out if you start doing it for a living as at that point you may be taxed on profits from your trading activities) plus they are exempted from stamp duty. All you have to worry about in cost terms is the commission you pay toyour broker i.e. the size of the bid to offer spread.
- Spread betting The easy way to geared, tax-free returns
- Forex trading- How to profit from currency movements
There is one drawback to spread bets being CGT free however. That is you can't claim any relief for losses, as you would be able to if you sold say shares at a loss. That's one reason some investors prefer contracts for difference (CFDs). These are similar to spread bets in many respects but are subject to capital gains tax and also attract loss relief when trades backfire.
-
Can you afford to retire in 2025?From interest rates and inflation to tax changes, there are plenty of factors to consider if you plan to retire next year – here is how to prepare.
-
8 of the best properties for sale near ski slopesThe best properties for sale near ski slopes – from a luxury cabin in Geilo, one of Norway’s premier ski resorts, to a large chalet in Valais, Switzerland
