Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets, CFDs, OTC options or any of our other products work and whether you can afford to take the high risk of losing your money.




Spread betting vs CFD trading 

Published on: 29/10/2021 | Modified on: 07/08/2023

Both spread betting and contracts for difference (CFDs) are margined products and forms of financial derivative trading.

Derivative trading is when traders speculate on the future price action of an asset via the buying or selling of derivative contracts, aiming to achieve enhanced gains when compared with buying the underlying asset outright. Traders can trade derivatives on a range of financial markets, including forex, indices, commodities and shares.

They both provide similar benefits, yet boast their own advantages, and carry their own risks.

Investing and trading are different approaches for trying to profit from the price movement of financial assets. Investing takes a longer-term approach, while trading focuses on shorter-term buying and selling, using leverage. 

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Chief Market Analyst
mhewson_CMC

Main differences between CFDs and spread betting 

A key difference between spread betting and CFD trading is the taxation of profits. Gains from spread betting are tax-free*, while profits made from CFD trading are subject to capital gains tax. As neither product results in ownership of the asset traded, there’s no stamp duty charge.

Another difference is regional availability – spread betting is only available in the UK and Ireland, whereas CFD trading is available in many countries globally.

Profits and losses from spread betting are realised in the currency you bet in. For CFDs, profit and loss is realised in the traded market’s base currency, and therefore is subject to a currency risk. Both trading methods allow for going long or short, although there are some differences in terms of pricing.

CFD and spread betting trade example 

Trading on the UK 100

Here’s an example of how to trade on our UK 100 – Cash instrument, which is based on the UK’s benchmark stock index measuring the performance of 100 companies. The following information is the same for both spread bet and CFD products:

Sell price = 7277
Buy price = 7278
Spread = 1
Margin rate = 5%

Let’s assume you think the price of the UK 100 will rise, so you open a buy (long) position with the hoping to profit from a rise in the index's value

Spread bettingCFD trading
You open a stake size of £10 per point. For every point that the instrument moves up or down, your profit or loss will be multiplied by your stake amountYou buy 10 CFDs or ‘units’ at the buy price. At the end of the contract, the difference between the opening and closing prices will be exchanged
CFD trade example

The UK 100 has a margin rate of 5%, which means you only need  to deposit 5% of the total value of the trade as your position margin.

Spread bettingCFD trading
Position margin: (5% x (£10 x 7278)) = £3,639Position margin: (5% x (10 x 7278)) = £3,639
Spread bettting margin example

The UK 100 then moves to a new sell price of 7302 and buy price of 7303. This means your prediction is correct and the instrument rose in value. You decide to close your bet by selling at the new sell price of 7302.

Spread bettingCFD trading
As the UK 100 has moved 25 points in your favour, multiply this by your stake size to calculate your profit (25 x £10 = £250)As the UK 100 has moved 25 points in your favour, multiply this by the size of your position to calculate your profit (25 x 10 units = £250)
Spread betting trade example

What about any extra charges?

Spread bettingCFD trading
No commission charges
Holding costs will apply if carrying positions overnight
No currency risk or conversion costs (see below for further details)
CFDs are subject to CGT*
There is a commission charge on share CFDs
Holding costs will apply if carrying positions overnight
Your profits and losses may be affected by currency fluctuations and currency conversion fees


View our spread betting and CFD trading costs

Spread betting or CFD trading: which is right for me? 

Spread bettingCFD trading
No stamp duty No stamp duty
No capital gains tax* Losses can be offset against profits for tax benefits
Commission-free, with an additional spread payable on shares and ETFs Commission-free trading, apart from shares and ETFs
Trade using margin Trade using margin
Speculate on both rising and falling markets Speculate on both rising and falling markets
Leveraged access to the markets Leveraged access to the markets
Access to 12,000+ global instruments Access to 12,000+ global instruments
24-hour dealing 24-hour dealing
Prices derived from the underlying market Prices derived from the underlying market

CFDs vs spreads betting: in-depth comparison 

FeatureSpread bettingCFD trading
Tax treatmentProfits made are exempt from stamp duty and capital gains tax in the UK and Ireland*.Since you don't own the underlying asset when trading CFDs, there is no stamp duty to pay. However, you will be subject to CGT.
Who can spread bet and trade CFDs?Only available to customers who reside in the UK or Ireland.Available to customers in many countries globally.
Short sellingYou can go long as well as short so you can take a long position when market prices are rising or open a short position when prices are falling.Ability to go long as well as short so you can take a long position when market prices are rising or open a short position when prices are falling.
Shares and ETFsWhen spread betting on shares and ETFs, there’s an additional spread, which is built into the prices displayed on our platform.When trading shares on our platform, a CFD commission will be charged to your account when you execute an order. This is in addition to the spread.
Holding costsHolding costs may apply, and can be positive or negative, depending on the direction of your bet and the applicable holding rate. Holding costs may apply, and can be positive or negative, depending on the direction of your trade and the applicable holding rate.
Currency riskAll your bets are placed in £ per point or € per point and don’t involve currency conversion. As such, there’s no currency risk with spread betting.Your potential profits or losses are exposed to currency risk, and may be subject to currency conversion fees. Currency risk means your return could be negatively impacted by currency fluctuations.
Calculating profit and lossTo calculate your profit or loss, find the difference between the price at which you enter and the price at which you exit, then multiply this difference by your stake.With CFDs, your profit or loss is determined by the difference between the price at which you enter and the price at which you exit, multiplied by the number of CFD units.
Margined trading**Spread betting is a financial leveraged product, which means you only need to deposit a small percentage of the full value of the spread bet in order to open a position.CFDs are a leveraged product, which means that you only need to deposit a small percentage of the full value of the trade in order to open a position.
TimeframeShort-term: daily, weekly, and monthly trades.Short-term: daily, weekly, and monthly trades.
Forward contractsYesYes
Range of marketsMore than 12,000 instruments, including forex, stock indices, shares, ETFs, commodities, bonds, and share baskets.More than 12,000 instruments, including forex, stock indices, shares, ETFs, commodities, bonds, and share baskets.
DividendsAs spread betting is a type of derivative trading, you’re not entitled to receive dividends – if you have an open position on a stock or an index subject to a dividend, it will be reflected as a price adjustment on our platform.As CFD trading is a type of derivative trading, you’re not entitled to receive dividends – if you have an open position on a stock or an index subject to a dividend, it will be reflected as a price adjustment on our platform.
Available for hedgingYesYes
Trading hoursTrade out of hours on forex and major stock indices with 24/5 access.Trade out of hours on forex and major stock indices with 24/5 access.
Corporate accountNoYes
Mobile tradingYes – iPhone, iPad, Android.Yes – iPhone, iPad, Android.
Available on MT4YesYes – forex, index and commodity CFDs.

Spread betting & CFDs FAQs

What is the spread in a CFD?

In CFD trading, the spread is the difference between the buy (bid) and sell (ask) price that is quoted for a financial instrument. The buy price is higher than the sell price, and the spread will fluctuate depending on market conditions. Read mpore about calculatikng the bid-ask spread

Can you spread bet internationally?

Spread betting is only available for customers in the UK and Ireland. However, contracts for difference (CFDs) are available to trade in most countries, where you will have the same exposure to the markets through the use of leverage. Read about the risks of CFDs.

Can you spread bet or trade CFDs without leverage?

Our platform requires clients to trade with leverage. However, the minimum margin rate is different depending on the market you’re trading. See our markets page for more information. We recommend making use of our risk management and execution tools when opening a position. Find out more about our spread betting demo account to practise trading on margin.

Are spread betting and CFD trading tax-free?

Both spread betting and trading contracts for difference (CFDs) are exempt from stamp duty, as you do not own the underlying asset. However, you must pay capital gains tax on your profits when trading CFDs. Discover our CFD trading costs.

Does leverage work the same for spread bets and CFDs?

Trading with leverage works in the same way for spread bets and CFDs. A trader is only required to deposit a fraction of the full value of the trade in order to gain exposure to the markets. Remember that leverage increases the risks as profits and losses are magnified equally and reflect the trade’s full value.


*Tax treatment depends on your individual circumstances. Tax law can change or may differ in a jurisdiction other than the UK.
**Remember: when trading on margin, the amount you will be required to deposit reflects a percentage of the full value of the position. This means that your losses will be amplified and you could lose all of your capital. Trading using margin is not necessarily for everyone and you should ensure you understand the risks of spread betting and CFDs. If necessary, seek independent professional advice before placing any trades.