The new coalition government has proposed a change in the CGT rules that could affect contracts for difference, but spread betting should be safe.
The idea behind the change is to separate business assets from non-business assets – or speculative assets as they sometimes call them. This will affect contracts for difference as CFDs fall under the Capital Gains tax regime, and in almost every case will be defined as a non-business gain. The non-business capital gains will be taxed at a rate close to income tax.
The basic problem is that the UK government is very short of money, and they will need to tax a lot of things. As business investment creates jobs and is more prone to leaving the country than small investor’s money then the gains are under scrutiny.
There are currently few details on the exact plans. However the top rate of income tax is currently 50%, and whoever is taxed at that rate is likely to find that their capital gains are also taxed at a similar rate. It must be stressed that the 50% rate will not apply to those on basic rate or 40%, who will have their own higher rate.
Any profits on Contracts for Difference are not taxable at the moment. There are no proposals to make this retrospective.
Spread betting is not covered under the Capital Gains Tax regime. The tax system regards Spread Betting as gambling, and gambling losses are not allowable either for income tax or capital gains tax. As a result neither are the gains.

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