Spread Betting vs CFDs:
Which is Right for UK Traders?
Both spread betting and CFDs let you speculate on financial markets with leverage. Both can be used to go long or short on the FTSE 100, gold, currencies, or shares. But they're taxed very differently — and that difference can put thousands of extra pounds in your pocket every year.
The Big Comparison
| Feature | Spread Betting | CFD |
|---|---|---|
| UK Capital Gains Tax | None* | 18–24% above £3k allowance |
| UK Income Tax | None (for most) | None (unless professional) |
| Losses offset other gains? | No | Yes — vs other CGT gains |
| Available to non-UK residents | No — UK only | Yes (most countries) |
| How you stake | £ per point/pip | Contracts or lots |
| Overnight funding | Yes (same rates) | Yes (same rates) |
| HMRC classification | Gambling | Financial instrument |
| FCA regulated | Yes | Yes |
*For non-professional retail traders under current HMRC rules. Consult a tax adviser for your specific situation.
How Spread Betting Works
In spread betting, you stake a £ amount per point (or pip) the market moves. For example:
- FTSE 100 is at 8,000. You bet £5 per point it will rise.
- FTSE rises to 8,100. You've made 100 points × £5 = £500 profit — tax-free.
- If FTSE fell to 7,950, you'd lose 50 points × £5 = £250 loss.
The broker makes money on the spread between the buy and sell price — just like a CFD. The underlying mechanics (leverage, stop losses, margin calls) work identically.
How CFD Trading Works
With a CFD, you buy or sell a specified number of contracts. The profit or loss per contract depends on the price move:
- You buy 1 FTSE 100 CFD contract at 8,000
- FTSE rises to 8,100. 1 contract × 100 points × £1 per point = £100 gross profit
- You'll pay CGT on your annual net gains above £3,000
- But any losses can offset gains on shares, property, or other CFD trades
The Tax Difference: A Real Example
Scenario: UK higher-rate taxpayer, £15,000 trading profit in a year
Spread Betting
CFD Trading
Spread betting saves £2,880 in this example. The higher your profit, the bigger the tax advantage.
When CFDs Beat Spread Betting
Spread betting isn't always better. CFDs have advantages in specific situations:
- Loss offsetting: If you've had a losing year CFD trading, those losses can offset gains from shares, property, or investments. Spread betting losses cannot. This is valuable if you have other capital gains.
- Trading from outside the UK: Spread betting is only available to UK residents. If you move abroad, you'll need to switch to CFDs.
- Specific instrument access: Occasionally a broker offers an instrument on CFD but not spread bet accounts — though this is increasingly rare with major brokers.
Which Should You Choose?
Choose spread betting if you're a UK resident who expects to be profitable. The tax-free status typically wins, especially above the £3,000 CGT allowance.
Choose CFDs if you have significant capital losses from other investments you want to offset, or if you're not UK-resident.
Consider both accounts at the same broker. Keep them separate. Use spread betting for most trading; use CFD account when you need loss crystallisation.
Most major UK brokers — IG, CMC Markets, Spreadex — offer both account types. Opening both takes minutes and lets you choose tactically each tax year.
💡 Get the Full Tax Picture
For high earners, the interaction between trading profits, income tax, pension contributions, and CGT gets complex. Use the free calculator at High Earners Tools:
High Earners Tax Tool →