Spread betting vs CFDs
The key difference between spread betting and CFD trading is how they are treated for taxation. Spread betting is free from capital gains tax (CGT) while CFD trading requires you to pay CGT*. Spread betting is also only available in the UK or Ireland, while CFDs are available globally.
See inside our platform
Unlock our full range of products and trading tools with a live account.Create an account
How does spread betting work?
When you spread bet, you choose whether the price of a product or financial instrument (such as a share, stock index, currency pair or commodity) is likely to go up or down, and decide how much to bet. The amount you wish to bet per point of movement in price is your stake.
For example, if the product's price moves in your favour, your profit is calculated by multiplying your original stake size by the number of points the instrument has moved. If it goes against you, your loss will be calculated in the same way. Remember, losses can exceed deposits.
How do CFDs work?
When trading CFDs, you buy or sell a number of units or a specific amount of CFDs in an instrument, similar to the way you would when trading physical instruments. With CFD trading however, you don't own the underlying asset and have the ability to trade on margin. This allows you to take a position with a notional value of much more than the amount of money you are required to deposit.**
Want to learn more about CFD trading with CMC Markets?
*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.
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.