If you want exposure to stock market movements, you have two main options: buy the shares outright (share dealing) or spread bet on the price. For UK traders, the tax implications make this a crucial decision.
Side-by-Side Comparison
| Feature | Spread Betting | Share Dealing |
|---|---|---|
| Capital Gains Tax | Exempt | 18% / 24% above £3,000 annual exempt amount |
| Stamp Duty | Exempt | 0.5% on purchases |
| Dividends | Adjusted (80-90%) | Full dividend received |
| Ownership | No (derivative) | Yes (you own the shares) |
| Voting rights | No | Yes |
| Leverage | Up to 5:1 (shares) | None (unless margin account) |
| Go short | Yes | Limited (need to borrow shares) |
| Loss offset | No | Yes (against other gains) |
| ISA eligible | No | Yes (tax-free wrapper) |
| Overnight costs | Yes (daily financing) | No (you own the shares) |
Worked Example: £10,000 Profit on Barclays Shares
Spread Betting
- Profit: £10,000
- Tax: £0 (exempt)
- Stamp duty: £0
- You keep: £10,000
Share Dealing (Outside ISA)
- Profit: £10,000
- Stamp duty on purchase: 0.5% of, say, £50,000 = £250
- CGT: (£10,000 - £3,000 annual exempt amount) × 24% = £1,680
- You keep: £8,070
Share Dealing (Inside ISA)
- Profit: £10,000
- Stamp duty on purchase: £250
- CGT: £0 (ISA wrapper)
- You keep: £9,750
When Share Dealing Is Better
- Long-term investing — holding for months or years. Spread betting overnight financing charges compound daily and make long-term holding expensive.
- Dividends — you receive the full dividend and qualify for the £500 dividend allowance
- ISA wrapper — £20,000 annual ISA allowance lets you hold shares completely tax-free with no financing costs
- Pension (SIPP) — retirement savings with income tax relief
When Spread Betting Is Better
- Short to medium-term trading — holding for minutes to weeks, where financing costs are minimal
- Going short — much easier than borrowing shares
- Active trading — the tax savings compound with every profitable trade
- Capital efficiency — leverage means you can trade larger positions with less capital
The Hybrid Approach
Many UK investors use both: a Stocks and Shares ISA for long-term holdings (tax-free dividends, no financing costs), and a spread betting account for shorter-term trades and going short. This gives you the best of both worlds.
See our broker rankings for the best spread betting platforms, or check which brokers also offer ISA and share dealing accounts alongside spread betting.
Between 51-82% of retail investor accounts lose money when spread betting. This comparison is for informational purposes and should not be considered financial advice.
