Are Binary Options taxable in the UK?

March 14, 2017 by in category Articles tagged as , , , with 0 and 3
Home > Blog > Articles > Are Binary Options taxable in the UK?

Binary options have become increasingly popular in the UK, so the question if any profits from this trading method are taxable is pretty much inevitable. Most people who are trading binary options look for a definitive answer, but often it isn’t too easy to reach an acceptable conclusion without consulting a tax advisor. In general, money coming through eWallets like Skrill, Neteller and even PayPal are not under tax regulation, hence no tax could be paid, but let’s find out about binary options tax a bit more. Since tax laws vary for many countries we are going to focus particularly on the taxation regulations in the UK.


Current situation with UKGC & FCA

To cut to the chase, binary options are still included in the UK Gambling Commission as long as they are located in the UK. Otherwise, the responsibility of regulation falls under the Financial Conduct Authority. Brokers inside the EU with a CySEC license even have the ability to seek FCA regulation, if they meet the criteria. In march of 2015, the UKGC mentioned in a letter that the government is providing secondary legislation provisions, which will ensure that binary options brokers are supervised by the FCA instead of the Gambling Commission. In all of 2016, they have been pretty much silent about this issue. Although the UKGC has stated that they don’t think it is gambling, binary options are still classified as a form of “betting”.

How does the HM Revenue & Customs decide tax liability?

These are the main points for the correct treatment of any financial transaction or investment, which the tax authorities use to define tax liability:

  • Consistency of activity
  • Who is executing it
  • Purpose of activity
  • Pattern of activity

For the most part, HMRC tends to consider the trading of binary options as betting, which means for any profits made from it, both Income and Capital Gains Tax are not applicable. HMRC will not regard you as a “trader”, as long as the activity you are involved in consists exclusively of speculative transactions. On one side this is positive because it basically means your profits are “tax-free”, however, the disadvantage is that you cannot claim tax relief on any losses made. Even in the case that profits from trading binary options are your sole source of income, it is very unlikely that they would be considered liable for any kind of tax at the present moment.

The future of Binary Options taxation & MiFID II

The MiFID (Markets in Financial Instruments Directive) is an EU law that provides harmonized regulation for investment services. To this day, the UK has not yet categorized binary options as a financial instrument. However, the government has stated that because of the growth of the binary options market and concerns regarding consumer protection, it would make sense to treat them as such. This new classification will come into effect with the implementation of MiFID II on January 3rd, 2018. For the duration of 2017, brokers providing binary options can apply for approval by the FCA.

Conclusion about binary options tax

To resolve the question if binary options are taxable in the UK; we can say that at the present moment and for the rest of 2017, profits made as an individual person will not attract any kind of tax. As mentioned beforehand, this is going to change in January 2018, when MiFID II comes into effect. Binary options will then be classified as a form financial instrument or investment and will be fully regulated by the FCA. This means from 2018 and on, you will have to state your profits when filling the tax return. That may seem like a disadvantage; but your losses can be subtracted from the profit, which will be the final amount you have to declare.

Most notably, brokers in the UK providing binary options services will need clearance from the FCA and it will be very easy to distinguish between those who are trustworthy and those who are not.

Open FREE binary options demo-account
Binary options are not available to retail EU traders. If you are not a professional trader, please leave this page.

Binary Options trading involves high risks which may not be suitable for every person. Never invest money which you can’t afford to lose and make sure you familiarise yourself with the basics of binary options before you start. is not responsible for any losses, as all our pages should be used for informational purposes only.

Copyright © 2014-2019 All Rights Reserved. Website about Binary Options -, Author: MrBinary