Advantages of spread betting

Spread betting is a popular form of leveraged trading that allows traders to speculate on financial market movements. Like CFD trading, spread betting is a form of online trading that can be accessed via a trading platform. In this article, we will cover the advantages of spread betting, some of which are unique when placing spread bets, for example, tax.

Is spread betting tax-free in the UK?

Spread betting is tax-free in both the UK and Ireland*, which means that if you are situated in either of these locations, you will not have to pay extra charges. However, tax treatment depends on individual circumstances and tax laws are subject to change.

Spread betting is tax-exempt in the UK and Ireland, so no stamp duty or capital gains tax is required to be paid or reported to the HMRC on profits made. Spread betting is considered a speculative bet instead of an investment, and so it is treated in the same regard as a gambling activity.

Please note that spread betting isn’t available outside the UK or Ireland. If you are looking for a more suitable product, then we also offer contracts for difference (CFDs), which are available globally. Read more about trading CFDs with us.

Spread betting tax explained

Spread betting’s unique benefit is that it is exempt from capital gains tax and stamp duty. When compared to conventional share trading and CFD trading, spread betting is the only product to offer tax-free trading in the UK and Ireland.

No stamp duty. Unlike traditional share trading, you don't have to pay stamp duty when you spread bet because you are not buying the underlying product. Instead, you take a position based on whether you expect the price of that product to rise or fall.
Profits are tax-free. Spread betting profits are exempt from capital gains tax (CGT) in the UK and Ireland.
Commission-free trading. Spread betting is exempt from many of the costs that you face when you trade shares with a stockbroker, such as commission fees on profits, which you also have to pay when trading CFDs.

As a company, we are remunerated through the spread we offer on each product, which comes included in the pricing on our Next Generation trading platform. Learn about spread betting spreads to discover how our calculations work.

However, tax is not the only benefit that spread betting has to offer, so read on to find out more.

What are some other spread betting advantages?

Speculate on falling markets

When you spread bet, you don't physically buy the instrument on which you are taking a position. You instead speculate on whether you expect prices to rise or fall. If you think the price of a particular instrument is going to fall, you can go short (sell) and if you think prices are going to rise, you can go long (buy).

Trade using margin/leverage

Spread betting enables the use of margin or leverage. Margin trading allows you to do more with your capital – you can open a bigger position than you would be able to if you had to fund the full value of the position.

For example, if the margin rate for a product is 5% and you wanted to place a bet worth £2000, you could open a position using just £100 from your available account balance. Remember, however, that spread betting using margin can increase your losses as well as profits, as they are relative to the full value of the position.

Multiple order types

When spread betting, you can choose between a range of order types, including the following:

Market orders: execute the trade immediately at the available market price. More than likely guaranteed to be filled given that there are enough buyers and sellers at the time.
Limit orders: trigger the trade at a specific price that is above or below the current market price, often within a set time period. Price is guaranteed but the filling of the position isn’t.
Stop-entry orders: allow you to enter a trade at a selected target price. Mostly used when market value appears to be falling and the price is less favourable for your chosen asset, with the aim of capturing momentum at the start of a new trade.

Spread bet on-the-go

You can spread bet anywhere in the UK or Ireland via our desktop platform, mobile or tablet device. With cross-device functionality, you could open a trade on your desktop and close the trade hours later on your mobile device. Our spread betting app also features fully interactive charts, with over 40 technical indicators and mobile-optimised layouts.

Risk-management tools

We offer a number of risk-management controls, including stop-loss orders. A stop-loss may help you manage your exposure by setting a price level beyond which you are not prepared to risk any more of your capital on a position. When used effectively, a stop-loss order should automatically close your position if the price of the relevant instrument moves against you and reaches the price level where you wish to exit that position.

It's important to remember that regular and trailing stop-losses may not protect you from market gapping or slippage, so for 100% certainty that your stop-loss will be executed at the exact price you want, you can also explore guaranteed stop-loss orders, which come with a small premium charge. Other risk-management features include trailing stop-loss orders and take-profit orders.

Thousands of global instruments

Spread betting can be a cost-efficient way to speculate on new markets. We offer prices on over 12,000 financial instruments, including shares, currencies, indices, commodities, treasuries and ETFs from across the globe.

24-hour trading

You can spread bet on a huge number of forex pairs 24 hours a day, from Sunday evening through to Friday night. We also offer many indices, commodities and treasuries which are almost tradable around the clock, bar a short break. For example, the UK 100 is available to trade between 1am on Mondays and 9pm on Fridays, apart from two breaks between 9.15pm and 9.30pm, and 10pm to 11pm.

Unique markets

We also offer spread betting on unique markets that are exclusive to CMC Markets, such as commodity indices, forex indices and share baskets, which provide efficient and cost-effective exposure to several instruments within an asset class using a single position.

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Explore the benefits of spread betting with CMC Markets

If you are interested in all that spread betting has to offer, get started by opening a live account.
Still not sure on which product to trade? See our guide to spread betting vs CFDs.
See our list of spread betting courses to find out tips, strategies and trading definitions within the financial markets.
If you are a beginner, open a demo account to practise spread betting with £10,000 worth of virtual funds in a risk-free environment.
Browse our range of execution and order types, which can help to minimise losses when spread betting on volatile markets.

It’s worth noting that not all spread bets are successful and spread betting with leverage poses a very high risk of capital loss, which is why many traders decide to use risk-management tools. Don't forget to read about the risks of spread betting before placing a trade for a fair overview of the product.

FAQS

Is spread betting taxable in the UK?

If you’re a resident in the UK or Ireland, profits from spread betting are free from capital gains tax (CGT)*. However, tax treatment depends on personal circumstances and tax laws, which are subject to change, so please check your eligibility. Watch our spread betting intro video for more information.

How can I start spread betting?

To get started with spread betting, open a demo account to access our trading platform. Once your account is open, you can choose to ‘buy’ or ‘sell’ thousands of instruments using order tickets and implement risk-management conditions. For a more detailed analysis, see our detailed guide on what spread betting is.

What markets can I access with a spread betting account?

You can access over 12,000 markets with a spread betting account. With us, you can speculate on forex, indices, commodities, shares, treasuries, ETFs and our exclusive asset classes. See our range of markets with competitive spreads and margin rates, plus market opening hours.

Can I hedge with spread betting?

When you hold a short to mid-term investment, hedging with spread bets can be used as a tool to help offset any losses from poorly performing assets in your investment portfolio. Read more about hedging strategies to get started and open a spread betting demo account to practise.

*Tax treatment depends on your individual circumstances. Tax law can change or may differ in a jurisdiction other than the UK.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

*FSCS is an independent body that offers protection to customers of financial services firms that have failed. The compensation amount may be up to £85,000 per eligible person, per firm. Eligibility conditions apply. Please contact the FSCS for more information.