The reality is, you probably don’t qualify for the Betfair premium charge yet…
If you do, unlucky. This post will help…
Plenty make the lower threshold at 20%. Whilst less hit the upper bracket of 40% plus. But don’t let it stop you, it’s only a small obstacle.
Understanding Betfair’s Premium Charge…
Once you do 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 from some time back…
Now I’ll explain how premium charges are calculated in simple terms. Despite Betfairs explanations, many still don’t seem to get it…
Betfair Premium Charges: What’s the Qualifying Criteria?
Once you meet the qualifying criteria below, you become eligible to pay 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 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 5% 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 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-ish (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.
How Can We Avoid Paying the Betfair Premium Charge?
To reduce your Betfair premium charges there are only a few options…
- Increase generated commission: easier said than done unless you’re an automated trader and can find a break-even strategy. And then it would need to be scalable too, in order to increase generated commission significantly.
- Arbing at value: by doing this you could make a couple of quid on the way too. Although like generating more commission, bookies are wise to arbers and traders now. Betting at any kind of value with the bookies is likely to be short-lived, making it quite tiresome. It’s not impossible, but for the time spent finding an arb to play the return is low in my opinion. Avoiding some PC is the added value of course, but if the arb loses and you win on the exchange you could face paying extra premium charges. Less than ideal.
- Multiple accounts: accounts in others names, addresses and IP’s. This brings many problems and isn’t right on many levels, bringing additional risks as well. Betfair have a ‘premium charge evasion team’ that can suspend and investigate suspicious accounts.
- Use Betdaq more: It’s the only one that makes any sense to me. Liquidity on Betdaq is low, but there has been an improvement over the last 2 years. Premium charges don’t exist on Betdaq, and commission is lower anyway.
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; later on in your trading career, as you profit more, avoiding the charge totally is going to be hard. Save what you can, while you can (arbing is the choice call – before you qualify for the PC).
Betfair Removed £52,000 From Customers Account
Yep, you read that right…
In 2011 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.
Is Premium Charge Fair and Legal?
There’s no other way to explanation; 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!
Betfair Premium Charge In Summary:
Little can be done, except producing profit more! Or rolling the dice with extra accounts…
By adding the upper levels of Premium Charge Betfair have created a deter-ant to new traders. Learning to trade can be tricky at the best of times, the last thing you want to hear if 40-60% could be swiped from you when you reach the upper levels of success.
But remember… that’s exactly what it is. The upper levels.
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 and consider counter-measures like arbing early. Value betting with a bookmaker and laying it off on Betfair is a simple but relatively effective way to syfen money from one account to another. It’s totally legal and within the Premium Charge framework.
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