Sports trading and betting are a great way to make a tax-free income online. There are a few drawbacks to becoming a profitable trader apart from the infamous Betfair premium charge…
In today’s article we are going to cover:
- What the Betfair premium charge is?
- The qualifying criteria for the premium charge
- How the Betfair premium charge is calculated
- Strategies to avoid the Betfair premium charge
- What are the highest levels of Betfair’s premium charge?
Understanding Betfair’s Premium Charge
Once you qualify to pay Betfair’s premium charge, an extra tab will appear under your account section (seen in the image above).
Here’s a quick video sharing a few of my own thoughts on dealing with the Betfair premium charge.
Let’s take a look at how premium charges are calculated in the simplest terms possible.
Betfair Premium Charges: What’s the Qualifying Criteria?
Once you meet the qualifying criteria below, you become eligible to pay the Betfair premium charge:
- Bet on more than 250 markets (lifetime of account)
- Profitable account (lifetime of account)
- Total charges equate to less than 20% of your profit (lifetime of account)
From this point, you then have a Betfair Premium Charge ‘allowance’ which equates to £1,000 worth of premium charges. Until recently, this was displayed on your premium charge statement before you began to pay. Now, you just get an email and the additional tab on your account.
If you’re not sure about how much commission you’ve generated, what markets bet on, or how profitable your account is (lifetime) don’t worry, you’re not profitable yet…
Once you meet the 3 bits of criteria above, you will receive a delightful email informing you that your account now qualifies, congratulations!
You will also see the tab shown in the image at the top of this post within your website’s account section. This is the link to your ‘Premium Portal’. All the information from the qualifying points listed above will be shown, along with the week’s commission, profit and expected Betfair Premium Charge due the following Wednesday.
The Premium Charge Calculation:
Betfair’s Premium Charge Calculation is slightly confusing, so I’ve provided a breakdown below.
If Premium Charge calculations confuse you, don’t panic. I think they make that part of their strategy so the average punter just doesn’t get it.
It goes a little like this:
Premium Charge = % of weeks profit – weeks generated commission
So assuming you profited £1,000 this week, the premium charge (20%) would be £200 minus the commission you generated over the week (charged at 2% on wins). So if your generated commission was £40 you’d pay £160 making the figure up to the total £200 figure.
The upper 40% and 60% levels kick in at £250,000 net lifetime profit. The same calculation applies but with the additional rates.
At the bottom of your Premium Charge statement, you will see the current state of your ‘allowance’ starting at £1,000. Counting down to 0 each week you qualify for a payment. From 0 onward, you pay every Wednesday at around lunchtime (the exact time has varied in previous years).
One thing to note: when you start paying it, make sure there’s enough in your account. I’ve heard horror stories of those trading on the afternoon have opened a trade for the liability of their account and then found they can’t close out because the payment has been taken while the trade was open. I’m not sure if there is anything in place to stop that happening now as it happened to someone I spoke to some time ago.
Premium Charge Exclusions: Single wins accounting for 50% or more of gross profits are excluded from the week’s calculation. In trading that’s extremely unlikely, especially if you’ve been profitable for any period of time.
If you were straight-up betting this could happen. Most sports bettors however move on to other exchanges or the Asian markets if they hit premium charge levels.
How Can You Avoid Paying the Betfair Premium Charge?
To reduce your Betfair premium charges there are only a few options that you can consider.
1. Multiple Betting Exchange Accounts
Now I’m not going to say too much here, it’s quite obvious.
The initial premium charge allowance is £5,000. The 40% threshold starts at £250,000. All premium charges are in line with how much profit you make versus how much commission you generate. Having 4 of your nearest and dearest friends agreeing to perhaps you “helping them” with some “betting tips” in their name is quite an effective way of avoiding premium charges. Just make sure they know exactly what’s going on, agree, and you trust them.
Suddenly the thresholds are £20,000 and £1,000,000 respectively.
On this one, it’s probably best to make sure their bank statements aren’t directly linked to you. Just in case Betfair decided to demand them from the account holder.
Hardened matched bettors who use services like Odds Monkey might already be familiar with this kind of thing.
2. Flip-flopping Value
Next up is a strategy that is a little bit riskier and involves increased generated commission.
I’ve spoken to many that say they have done it successfully, although I’m not the greatest fan myself. The idea is to back an outsider with Betfair Exchange and lay it off elsewhere on a different platform, such as Smarkets.
The reason I’m no fan of this method is because of the following risks:
- Bad runs in variance
- Additional generated commission
- Bankroll required
There are arguments to counter all 3 points, such as getting a 0% markets commission deal and starting with shorter odd outsiders, with a very large bankroll. However, I don’t like it much personally. If you do end up on the unlucky side of variance you could end up paying even more premium charge. The next seems far more viable if you’re registering from the right location…
3. No Premium Charge Betting Exchange – Betfair Whitelabel
If you’re outside of the UK, it should be fairly easy to register with Orbit (a Betfair white label). Registering via a broker is needed but its one of the easiest ways to avoid paying premium charge, because there isn’t any.
The downside is the offering. Markets and liquidity aren’t as freely available as the main Betfair website although I suspect it’s where most of the bets end up. There’s only a 3% flat rate commission to pay. Be sure to check it out if you’re able to register from abroad.
4. Use Other Exchanges
There are plenty of alternatives to use when it comes to betting exchanges.
- Matchbook
- Betdaq
- Smarkets
All offer an exchange product.
Depending on the sport you trade and the markets you are profiting from. Not all of the exchanges may offer the ability to deploy the strategies you are using profitably on Betfair. However some people can make their strategies work on other exchanges and avoid having to pay the premium charge. This is one of the better options to consider for premium charge avoidance.
If you’re serious about trading the exchanges, reducing any expense should be high on the priority list. Much like TAX in the outside world, it’s a big deal. Finding ways to reduce premium charge payments early is logical.
In reality the later on in your trading career, as you profit more, avoiding the charge totally is going to be hard.
Cases Of Premium Charge Avoidance
Yep, you read that right…
In 2011 the Betfair premium charge team reportedly removed £52,000 from one customer account for ‘premium charge avoidance’. The harshest point being they seem to be able to act as judge, jury and executioner all in one foul swoop. There’s a full article here courtesy of the telegraph should you want to read it (it’s fairly long).
I couldn’t see any other articles online at the time of writing so would assume he didn’t get it back. A scary prospect for most.
So imagine the day you’ve qualified – how do you deal with it mentally?
Even though you know it’s going to hit you when profitable; getting a PC bill each week is still very hard to stomach. The most important thing to remember is NOT to change your trading. You’re successful for a reason, do not change it. You may add some of the options mentioned above to lower your PC but you have to remember why you hit PC in the first place; because you’re a good trader. Being a successful trader is a game of very fine margins – when you’ve found success, changing could easily give your edge away.
Betfair Commission Rates & Fee’s (Exchange)
The standard commission rates on Betfair are slightly simpler than the premium charge. First of all; you only pay commission on winning bets.
For traders, that’s great, because you only pay commission on the overall market result – not the actual bets struck. So for example, if you were to place a £100 trade (both back and lay) but the net result was £10 profit, you would only pay commission on that profit. Not the opening and closing bets.
The commission rate that you are liable to pay depends on your resident country, and the amount of money you bet.
This makes it hard to give you an exact figure here and now. Typically, the base rate within the UK and Ireland is 5%.
The standard Betfair commission rate is calculated like this:
Standard Commission = Net Profit x Market Rate x (100% – discount rate)
So as an example:
For somebody with a £100 profit and a 20% discount rate:
£100 x 5% x (1 – 20%) = £3
This would obviously mean our example user is on 3%. Easy enough right?
To be honest, you can’t change it so there’s not a lot of point in worrying about it. Plus, even if your generated commission is lower, the premium charge compensates for it.
The Highest Level Of Premium Charge
The highest levels of premium charge start to kick in once lifetime profits on accounts that qualify for the PC are in excess of £250,000 profit. These accounts are then subject to a rate of 40% and over, depending on efficiency.
Obviously, this is a real hit below the belt once your qualify. For context, a trader that profits £2,000 per week will see a jump in their premium payments by £400. Over the space of a year, that’s £21,800 extra in Betfair’s coffer.
Traders still get to take the same amount of risk for significantly less reward. A mere £26.73 profit on a race like the one snapped above leaves just £16.04 in the pocket.
Is Premium Charge Fair and Legal?
There’s no other way to explain; Betfair brought in Premium Charge to make more money. If you’re a courtsider or run automation (and always win). You should have to pay extra, because you are taking liquidity away for others with little to no risk. I feel that’s an honest view on PC.
However, it’s very unfortunate that decent hard-working traders get hit with Premium Charge too. After taking risks and working so hard to get profitable, it can be frustrating. But let’s be honest… it’s like a badge of honour that very few get to wear!
Ultimately it is legal but not exactly fair in my opinion.
Betfair Premium Charge In Summary:
We have covered a few ways to try and reduce/avoid the Betfair premium charge. Other then what we have covered the only further way to combat it is producing profit more!
By adding the upper levels of Premium Charge Betfair have created a deterrent to new traders. Learning to trade can be tricky at the best of times, the last thing you want to hear is that when you become successful a new tax of 40-60% is applied.
But it is important to remember that the premium charge kicks in once you are making a solid profit from your trading.
As gambling in the UK is tax-free 20% isn’t too much of a problem. Betfair premium charge above 40% certainly is though. If you’re new to the game it’s best to start off small, use other exchanges like Betdaq to see which strategies you can use on other accounts.
Top Post: 3 Simple Horse Racing Trading Strategies
65 thoughts on “Betfair Premium Charge – How It’s Calculated (and How to Avoid It)”
A good and easy to understand article on PC !!!
Tried to make it that way, thanks 🙂 there is something a little else extra but it’s not even worth mentioning as it just makes it all more confusing and very little difference on the bottom line.
Hello Caan, I’ve been arbing horse racing for a living for the last year and a half and my Betfair is around minus 50 grand I have also been paying between 400 and 500 in commission a week if I was to trade successfully have long would it be before I pay pc. Horse racing arbing has became much less profitable as prices change with Betfair almost and also having not many betting accounts left so looking to for a change.
Hi Richard, that would be entirely dependant on how much you profit 🙂 a while I’d guess.
So I’d have to make 50 grand before I even started getting near it. Be a long time then
Plus I must have generated 30 grand in commission over the last year an a half
Yes, this would also factor, making it harder to pay it so soon. Commission charges must be less than 20% of the lifetime profit on your account.
Yes that is correct. The premium charge calculation is mindful of this type of thing. So in order to pay it you would have to make that profit back, and then qualify.
A friend of mine has been successful at trading football team news for many years and for a while he used multiple accounts in family members names to avoid PC. Eventually he got hit with a 5 figure charge when betfair linked the accounts, they took the money straight out of his account and informed him afterwards. I guessing they caught him through IP addresses but who knows. Definitely not a wise thing to do!
Yes, not worth the risk. I read in the news when they caught someone and took around 30k out of their account… may have even been the same person.
I think that must of been another instance, as I know it was more like £12k taken from the guy i know. Just goes to show they have no qualms about doing it. Makes me wonder how they would treat two traders living at the same address?
I think there is a way to get round this with multiple accounts but I am not going into it here. The only real solution to it is to use Betdaq more, but it would probably have to start on Saturdays and big meetings until confidence in the liquidity built up. Mind you if there was a wholesale switch to Betdaq they would probably introduce a premium charge.
of course but thats a serious risk to run…
Fucking corporate mentality. Betfair is like “Guys we’ll just do all is in our power to suck all your money and if you try to avoid that you’re in deep shit, cuz we have legal solutions to take even more of your money, all for our holy corporate profit”. And the government is like “Oh casinos are annoyed by some shit and cry for help. HHMM what to do? dont really know so lets make a law.” Its like they have all the tools for profit and we need to try the hardest. I think this also makes us smarter than them. Top kek
Hi Hannah, say what you think why not!
Although in all seriousness. I do agree… the Premium Charge was supposedly introduced so that Betfair could re-invest in the exchange infrastructure. Sounded great. There was a lot of unhappy people at the time but that seems to have blown over now.
Sad to see that several years later and the exchange still seems to fall over at peak times like Cheltenham and Aintree. Still, it could be worse.
Thanks for commenting,
Caan
We will always be on an uneven playing field. Not only do they charge outrages p/c they run away to the less tax that is Gibralter etc.
Indeed, as do all of the firms. Just the way the world works I guess. Every man for himself…
Hi Caan,
Great materials. Thanks.
Can you please help me to understand that when is the 20% Charge kicks in?
Lets say, If I am up £20k in the last 6 month, should I already paying the 20%?
Sorry for my ignorance.
Thanks.
Peter
Hi Peter,
It depends entirely on your generated commission. Once you ‘qualify’ you will get a ‘premium charge’ tab turn up in the dash of your account and probably an email if they still do it.
It’s basically more than 250 markets, profitable account, generated commission below 20% of profit over the lifetime of your account, 1k allowance then starts, so you have a 5k buffer, if you’re 20k up, but you’ve generated 20k generated comms over the lifetime of your account you will not be paying PC. However if for example you are 20k up (fit the other criteria) and have 1k generated comms you’ll be paying it for sure.
Either way, dont worry until yo get the email/additional tab. Then you have the 1k pretend PC allowance.
What does it mean by 250 different markets? Is this 250 different sports?
Thanks
Betting markets, Chris. 250 races etc.
IS there anywhere in BF that tells you how many you have bet on?
Thanks
Hi Chris,
Not that I’m aware of, not until you have a Premium Charge portal anyway. That will tell you.
Cheers,
Caan
I can’t understand why betdaq has not grown more. It seems punters are happy to get ripped off.
Indeed they are. That’s the problem, I’m sure nearly all the traders would bail in a heartbeat if there was the chance. But they can’t go first…
What do Betfair pretend this charge is for? Why would a company suddenly start to charge it’s most successful customers up to 60%?
Why not move to Smarkets (for example) or at least use them for a percentage of trades to limit the Betfair lifetime profit, perhaps the most liquid trades?
Smarkets are even worse, they trade their own markets. Who would want to play with somebody that’s against them, that can watch their hand?
can you go a bit further into this point
I really, really, really can’t understand how Betfair can defend the PC. In what universe is it “Fair” to charge this? I thought they loved the fact that the winners made sure there is a lot of liquidity, but apparently not. Why do they have a problem with some people winning a lot? I truly wish that Betdaq, Matchbook or other exchanges step up and the majority of Betfair users move all their money to one of those instead, as that is probably the only thing that would make Betfair actually living up to the “fair” part of their name. Question: Was the PC introduced after Paddy Power acquired Betfair or was it before (i.e., are Paddy Power the real bad guys here)?
I think that Bet365 and similar bookies operate with an over round of somewhere in the area of 5-7%, i.e. pretty close to the Betfair commision, and Bet365 even have some punters they lose money to, so surely the standard Betfair commision would be sufficient to make a decent company profit, especially as Betfair can never lose money to the bettors/traders? If it’s a problem for them they could start by not reducing the standard commision to bettors who use their service a lot. It’s pretty weird to reduce commision on the one hand to loyal customers and then punish them with the PC on the other hand. Makes no sense at all.
PC has nothing to do with Paddy Power, it’s been around many years longer than the merger took place. There is no reason for it, Betfair claimed it was money to be used to ensure there was a fresh supply of ‘losers’ (ie marketing) for the winning traders to suck money off, but in reality they did it simply ‘because they can’, and it’s more money in their pocket.
Can’t argue with that, Cameron.
I think you have to remember that also – those winners have no other place to go. And even if they do, who’s going first? Bearing in mind they will be walking away from a tone of cash.
So say your up and paying this PC because your trading made a profit this month and they take 20%. Then next month you have a bad time and lose half your profits. They will turn profitable systems into unprofitable and lost customers surely? They take more when your winning but not overall longer term? Some systems have ups and downs and this sounds really unfair for longer term bettors!
No nothing is returned. If you lost the month after your allowance will be in ‘credit’ until you recoup that loss and more, the additional profit is then charged at the rate. So nothing is returned but if you have a losing period, you’re not stung additionally.
After 10 years with Betfair I eventually ended up with the PC. What bothers me is the massive increase it is, I wouldn’t object to an increase to say 10% , but 20% is just too much. I moved to smarkets but the liquidity is pretty poor, however happy be paying only 2% now.
are the PC threshold charges based on turnover or profit on turn over
Hi Mark,
Profit. Although I do believe BF have run independent premium charge tests where some users have been offered a higher flat rate instead. Either way it works out similarly, mainly for in-play bettors.
Thank you Caan, I’ve searching for how it works on the web, and you are the only one the really knows how it works.. Thanks!
No problem. It does seem that many struggle to get their head around how the premium charge works. The first time it baffled me, but it’s not really that complicated once you’ve absorbed it…
The harder part of course is avoiding paying it.
I was recently talking to Betfair via their help desk asking for my lifetime balance, they sent it via email in a couple of days. It was interesting to see every bet l placed over the last 14 years. Then l asked how the premium charge was calculated, the answer l got shocked me. He said the first level was 40% charge and then it went up to 60% . Any body out there who could confirm or refute this as sometime these agents are not totally plugged in.
Mike
Hi there, I’m very new to the trading scene, so apologies if I’m overlooking something obvious here…but, would it make sense to once a week attempt a large loss at Betfair by for example laying Man City and backing them at Smarkets (where I currently get 0% commission)? Any comments much appreciated.
Sure, and if the bet wins instead of losing… you pay premium charge on that too.
Good point, I guess that only has to happen a couple of times in a season and you’re no further forward. Thanks Caan
Apologies for what could really be a daft question. The third point of:
‘Total charges equate to less than 20% of your profit (lifetime of account)’
Wouldn’t this always be the case if you are paying 5% on every profitable trade? (again apologies, I’m pretty sure I’m missing something obvious.
Hi Lee,
No because you are able to win, pay some commission and then lose… meaning the charges can be over 20% of your lifetime profit and loss.
Example:
1. You win £1,000 and pay £50 in comm.
2. You lose £900 the day after.
3. You are now £100 positive, having paid £50 in comm, thus your lifetime account is on 50% charges.
For someone in this situation, they would not be eligible to pay premium charges.
No because the commission is paid on net win, not the stakes placed.
Ah ok, makes perfect sense. Thanks for the reply.
Hi Caan,
Would you recommend trading at orbitexchange and 9wickets which are powered by betfair and they have not premium charges?
Thanks!
Manolo
I know some abroad use Orbit although haven’t had experience myself.
Hi Caan
First time poster here… Love the videos and the site content, they have been mega-helpful over the past year or so. Thank you.
I’ve been trading with the Betfair API for almost a year and I’m getting pretty close to the PC threshold….. it feels bitter-sweet, because I’m moving in the right direction but in the near future I know I’ll be royally bent over by Betfair.
The things I find most frustrating about the PC are; a) how hidden it is from the average user, and b) it is totally policed and dictated by Betfair with zero governance from any outside regulator.
If this “hidden” charge was made by a company from any other type of industry, then the company making the charge would have to be much more up-front about it. Imagine selling something like Avon products and being told after 6 months that you are “making too much money so we are going to add an extra charge to your bill”, it simply wouldn’t fly in any other industry. And I know its in the terms and conditions but the fact that they hide the ” Premium Charge Portal” until its applicable tells me that they are trying to be a bit deceptive.
If pressure was put on the Gambling Commission (or someone similar) to force Betfair to be more up-front and transparent about the PC it may make them rethink about things…. I’m not suggesting that they would eliminate it but surely having to tell all new customers that “we will charge upto 60% commission” would be a PR nightmare and may prompt a reassessment of how things are done.
…. Anyway, that was more of a rant than a question, I’m just going through the frustrations that a lot of your users appear to have already been through.
Cheers! I guess its like we say; its a badge of honour in a way. Just a new problem to solve too 😉 I’m sure many get around it, although you wouldn’t see that broadcast online.
Hi Caan,
Assume you pay premium charge or have done then? 😉
How much less liquidity is there on Betdaq, or for that matter Matchbook. I’ve just created an account with both. As I’m using software there which are completely free on thsoe two exchanges.
Yes, too much of it. There’s a lot less on other exchanges which is a real pain to be honest. Some have introduced a Premium Charge of their own too with slightly different specifications.
Yes of course. Betdaq and Matchbook have their own charges that are similar. You’ll see less liquidity too, unfortunately.
Hi Caan,
Thanks for the explanation. Is it 20% first? Someone commented saying BF customer service said it starts at 40%? Which has confused things a little for me. I also thought it was 40% before reading this post, I dont know where I heard that though.
I think it’s massively unfair that the charge applies to the overall lifetime profit of the account. If they have to do it then why not just treat it like tax where it is applied on a yearly basis depending on how much you make.
I think it’s scandalous and someone should start a movement to get everyone over to betdaq or somewhere so BF are forced to re think their charges. I know this will never happen haha, hopefully the other exchanges just get more liquid so traders have more good options.
I am understanding it right aren’t I? Once your account reaches a certain amount then you will be charged PC no matter how much or how little you make?
Cheers
That’s correct it starts at 20%. The 40% threshold doesn’t start to apply until after your account is £250,000 in profit.
Hi Caan,
How long does it takes to start the premium charge after you use all the $1000 allowance?
Will you receive an email from them straight away or it will take a few weeks?
I cannot belive there is an extra charge after the commission and it only takes me 4 weeks time. haha
You get the notification when you get the allowance. Once the 1k allowance is used, you start paying the following week.
Mr Caan paying 40% or 60% in commision. It doesn’t mean you are “special one” “the one” or other bullshit that can come out. You are just ripping off. They are worse then state taxes. Running your own businnes you can try to pay much lees but here there is no escape. Actually there is one wchich comes to my mind straight away fu…k th..m
Quite frankly I’m disgusted and confused as to why I know find myself liable to Betfair PC. I’m just an ordinary punter who wins some and loses some but I suddenly found my Betfair account -£68.02. It’s impossible to get any sense out of them, they just throw the rule book at me saying that explains it. So why haven’t they notified me or asked it I consent to these charges? Only a couple of days ago they ripped me off by reducing a bet from 1/2 to 1/50 because of non runners. The odds didn’t change and bookers were showing 4/6 but I was £170 @ 1/50 FFS. The problem is that I use Betfair to play niche markets that bookmakers won’t take decent money on so now I either accept the PC or ditch the account and go elsewhere. I’ve been with them for over 12 years and never a mention of PC so they’ve had their fair share of commission anyway but this is either going to make me stop betting or look elsewhere and I don’t know if Betdac is a good alternative, I don’t know much about them but at the moment I’ve told Betfair where they can stick their PC and asked for their complaints dept, they responded that issuing a complaint was pointless as they would just throw the rule book at me again. If I was a trader dealing in thousands I could understand it but I’m just an ordinary punter who they’ve crapped on from a great height
I know the feeling Mike, sorry to hear it mate.
Hi caan, great explanation as always. Is it lifetime profit on the entire account as in sports book, casino etc or just the exchange?
I’m sure it’s just the exchange
I was about to start being charged PC by betfair so I have taken all my money out of the account and now I just use BETDAQ, Smarkets and Matchbook.
Surely there is enough liquidity in those even if you have to spread your bet over all 3 exchanges. No way am I going to give Betfair another penny of commission.
My total gross profit on my account states £1852, commission £732 + PC £84 total charges £816 (44%).
Why am I paying PC when I’m way over 20% commission??
They have not even informed me I’m paying PC