Spread betting and CFDs (Contracts for Difference) look similar on the surface — both let you speculate on price movements with leverage, without owning the underlying asset. But for UK traders, there's one crucial difference: tax.
The Tax Advantage
| Feature | Spread Betting | CFDs |
|---|---|---|
| Capital Gains Tax | Exempt | Taxable |
| Stamp Duty | Exempt | Exempt |
| Loss offset | No | Yes (against gains) |
| Available to | UK & Ireland only | Worldwide |
| Currency | GBP per point | Base currency of asset |
For a profitable UK trader, spread betting is almost always more tax-efficient. If you make £10,000 profit from spread betting, you keep all of it. The same profit from CFDs could cost you up to £1,680 in Capital Gains Tax (at the 24% higher rate above the £3,000 annual exempt amount; the basic rate is 18%).
When CFDs Might Be Better
The only scenario where CFDs could be preferable is if you're consistently losing money. Because CFD losses can be offset against other capital gains, they provide a tax benefit that spread betting losses don't. But hopefully, that's not the goal.
CFDs also offer more flexibility for professional or institutional traders, as they're available globally and denominated in the asset's native currency, avoiding currency conversion on every trade.
Cost Comparison
Both products charge via the spread, and both incur overnight financing costs for positions held beyond the trading day. The costs are typically very similar at the same broker — most FCA-regulated providers offer both products side by side.
Which Suits Most UK Traders?
For many UK individual traders, spread betting offers practical advantages over CFDs — primarily the tax-efficient treatment and simpler account structure. If you are profitable, the absence of CGT and stamp duty can make a meaningful difference. However, not all traders are profitable — between 51-82% of retail accounts lose money — and the right choice depends on your trading style, markets, and experience. Use our spread calculator to compare costs before deciding.
See our broker rankings to compare FCA-regulated platforms.
