Quick answer
- Spread betting: stake £ per point; profits generally free of CGT and stamp duty; losses can't be offset.
- CFDs: trade in contracts/lots; profits subject to CGT; losses can be offset against other gains.
- Same leverage limits, same risks, very similar costs.
How each product works
Spread betting
You choose a stake per point of price movement. If you buy GBP/USD at £5 per point and it rises 40 points, you make £200. Your account is in pounds, so there's no currency conversion on profit and loss.
CFDs
You buy or sell a number of contracts (or lots). Profit and loss are calculated in the instrument's currency — dollars for GBP/USD — and converted to your account currency.
Side-by-side comparison
| Spread betting | CFDs | |
|---|---|---|
| Position size | £ per point | Contracts / lots |
| P&L currency | GBP | Instrument currency, converted |
| Capital Gains Tax | Generally exempt | Payable on gains above £3,000 |
| Stamp duty | None | None |
| Offset losses | No | Yes |
| Commission | Usually none (cost in spread) | Spread or raw spread + commission |
| Max retail leverage (majors) | 30:1 | 30:1 |
| Platforms | Broker platforms; MT4 at some brokers | MT4, MT5, cTrader, TradingView and more |
| Availability | UK and Ireland residents | Most countries |
The tax difference in practice
Imagine a profitable year with £10,000 of gains:
- Spread betting: generally no CGT due.
- CFDs: £10,000 − £3,000 annual exempt amount = £7,000 taxable, at 18% or 24% — £1,260 to £1,680.
Now a losing year with £5,000 of losses:
- Spread betting: the loss can't reduce tax on other gains.
- CFDs: the loss can offset other capital gains, such as from shares or property, and be carried forward if reported.
Costs compared
For forex, spread bets and standard CFD accounts usually have similar spreads, with no commission. Raw-spread CFD accounts can be cheaper for active traders. Both charge overnight financing on daily positions held past the rollover.
Which should you choose?
- UK taxpayer expecting gains, trading discretionally: spread betting is often more tax-efficient.
- Using MT5, cTrader or automated strategies: CFDs typically give more platform choice.
- Want to offset losses or live outside the UK: CFDs.
- Want P&L in pounds without conversion: spread betting.
The same trade, two ways
You expect GBP/USD (1.2700) to rise and want roughly £10 of exposure per pip.
| Spread bet | CFD | |
|---|---|---|
| Position | Buy £10 per point | Buy 1.27 lots (≈ $12.70 ≈ £10 per pip) |
| Price rises 30 pips | +£300 | +$381 ≈ +£300 (converted) |
| Price falls 30 pips | −£300 | −$381 ≈ −£300 (converted) |
| Tax on a £300 gain | Generally none | Counts towards CGT above £3,000 a year |
Economically the two trades are almost identical. The differences are in sizing, currency of profit and loss, and tax.
Things that are the same
- Both are leveraged derivatives — you don't own the currency.
- Both carry the same FCA retail protections: 30:1 leverage limit on majors, 50% margin close-out, negative balance protection.
- Both charge overnight financing on daily positions.
- With both, most retail accounts lose money.
Practical considerations
- Record-keeping: spread betting profits generally don't go on your tax return; CFD gains and losses do.
- Minimum sizes: spread bets often start from small stakes like £0.10–£1 per point; CFD minimums depend on the broker's lot sizes.
- Automation: Expert Advisors and algorithmic tools are more widely supported on CFD accounts.
- Running both: some traders use spread betting for discretionary trades and CFDs for hedging or automated strategies.
Frequently asked questions
Is spread betting better than CFDs?
Neither is better for everyone. Spread betting is usually more tax-efficient for profitable UK traders; CFDs let you offset losses against other gains and are available worldwide.
Can I switch between spread betting and CFDs?
Many UK brokers let you hold both account types and move between them.
Is the risk different?
No. Both are leveraged derivatives with the same FCA leverage limits, and most retail accounts lose money with either.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading these products. You should consider whether you understand how they work and whether you can afford to take the high risk of losing your money.