Binary Options

Cherrypi · 27 November 2013 at 10:26PM

Hi

Just wondering if someone out there can give me some advice - I work full time in a 'proper' job but have been dabbling in online binary options, ie betting on currency pairs as to whether they will go up or down. This has been done through a binary options trading site.

What I'm trying to find out is whether this is taxable if I make any money from it? To me it's like gambling which I know is tax free in the UK but is it classed as such? Would hate to get stung with a tax bill that I wasn't prepared for!

Many thanks for any info anyone can provide

Claire

chrismac1 · 27 November 2013 at 10:57PM

Unlike contracts for difference, there is no tax on your profits.

chrismac1 · 27 November 2013 at 11:10PM

https://marketsworld.com/binary-options-vs-traditional-trading

However, I feel I should warn you that the odds are utterly stacked against anyone making profits in this field. In particular please do not be seduced by anyone selling you any kind of system or similar products.

Forex is the largest market in the world, with billions traded every second 24/7 except weekends. Suppose you discover a system which enables you to beat this market, by putting on one bet per day and using Kelly or half Kelly staking. (If you do not understand what Kelly is, start finding out!)

Within a year starting on $200 bets, you can expect to have made $1m or more. In that position, can I ask you whether your first thought would be to spend lots of this cash marketing a product across the internet.

NO NO NO !!

You'd carry on placing your bets and watching your bankroll grow. The only reason to market a "system" is if it does NOT work!

http://systemsfortraders.com/

Take a look at this site. It tests out hundreds of systems per year. How many of these wonderful systems are still in use a year down the track?

NONE

How many are dumped within a few months due to problems or losses? Pretty much all of them. Some last longer before being dumped. Given the number of systems being tested, the number of systems which are successful for the first few months are about the number you'd expect to last that length of time by random chance alone.

jamesml · 29 November 2013 at 4:10PM

I would have thought this would be taxable to be honest - I think you are better off looking at the 'badges of trade' if you are trading then likelihood is your gains are taxable. Just because there is risk involved does not make it gambling!

chrismac1 · 29 November 2013 at 4:47PM

The last post, with all respect, is drivel. I say this as someone who from 2002 to 2006 took over £70k from bookmakers part-time and was part of an information syndicate in which 2 players were full-time and making over £50k per year in the UK.

In the USA and other countries such as Australia such profits are taxable. Not in the UK. What the OP is talking about is not even full-time trading, which is the only realistic way you can get any HMRC challenges.

My advice to the 2 full-timers at the time was to get a tax shield. This they duly did. At the time the student letting market was going well, and they both channelled some of their profits into that. Hence on their self-assessment returns they could declare rental income from 4 or 5 properties and as far as HMRC were concerned that was that.

Contracts for difference, like buying shares directly, are liable to capital gains tax. Spread bets and binary options are not. The badges of trade thing is a red herring until such time as you go full-time, and anyone who reads my earlier posts will realise this is less than 1% likely to happen.