Spread betting is a tax-free way to speculate on the price movements of financial markets — from forex and indices to individual shares and commodities. Unlike traditional investing, you don't own the underlying asset. Instead, you bet a certain amount per point of movement in the market.
How Does Spread Betting Work?
Every spread bet has two key components:
- Direction — you either "buy" (go long) if you think the price will rise, or "sell" (go short) if you think it will fall.
- Stake — you bet a pound amount per point of movement. For example, £2 per point on the FTSE 100.
The "spread" is the difference between the buy and sell price quoted by your broker. This is how spread betting companies make money — there are no commissions. When you open a position, you start at a small loss equal to the spread, and your position becomes profitable once the market moves past that spread in your favour.
A Simple Example
Let's say the FTSE 100 is quoted at 10,800/10,801 (sell/buy). You think it will rise, so you buy at 10,801 at £5 per point.
- If the FTSE rises to 10,851, you've made 50 points × £5 = £250 profit
- If the FTSE falls to 10,751, you've lost 50 points × £5 = £250 loss
Why Is Spread Betting Tax-Free in the UK?
Under current UK tax law, profits from spread betting are exempt from both Capital Gains Tax (CGT) and Stamp Duty. This is because spread betting is classified as gambling by HMRC, not investing. This means:
- No Capital Gains Tax on profits
- No Stamp Duty (saving 0.5% vs share dealing)
- No Income Tax on spread betting gains
- However, losses cannot be offset against other taxable gains
This tax-free status makes spread betting uniquely attractive compared to CFDs (where profits are taxable) or traditional share dealing (subject to CGT and stamp duty).
Key Risks to Understand
Spread betting uses leverage, meaning you only need to deposit a fraction of the full position value as margin. While this amplifies gains, it equally amplifies losses. Most FCA-regulated brokers offer:
- Negative balance protection — you can't lose more than your account balance
- Guaranteed stop losses — cap your maximum loss on a trade (for a small premium)
- Risk management tools — stop losses, take profits, and trailing stops
Between 51-82% of retail investor accounts lose money when spread betting. You should consider whether you understand how spread betting works and whether you can afford to take the risk of losing your money.
Getting Started
To start spread betting in the UK, you need an account with an FCA-regulated spread betting provider. We recommend starting with a demo account — most brokers offer these for free with virtual funds so you can practice without risking real money.
Check our broker rankings to find the best platform for your needs, or read our best platform guide for a detailed comparison.
