The quick answer is yes, matched betting is 100% legal in the UK (providing of course you are over 18 years of age).
Whats Going On?
Essentially all that you are doing whilst matched betting is placing bets, the fact these bets often cancel each other out (i.e. backing and laying the same selection) has no impact whatsoever on the legality of the activity.
It is well documented that many bookies don’t like customers over-using or “abusing” their promotional offers, the worst thing a bookie can do in such cases is restrict (or close) your account (getting gubbed).
Whilst getting gubbed can be annoying it is important to realise it does not mean you as a customer have necessarily done anything wrong! Bookies are well within their rights to restrict their customers in any way they see fit and are under no legal obligation to accept a bet from anyone, these restrictions can include no longer offering any promotions and limiting your stakes to only a few pence per bet!
In the UK any winnings from gambling activities are 100% tax free, this naturally covers matched betting and as such matched betting constitutes a tax free income in the UK – Amazing!