Spread betting vs CFD trading

CFDs and spread betting are two common ways to trade financial markets. Here, we’ll explore what each method involves, the key difference between them, and how these factors can impact your trading.

CFDs vs spread betting - key differences explained

CFD trading and spread betting share many similarities, such as the use of margin trading or leverage, which enables traders access to the full position size with a relatively small outlay. They also allow speculation on prices both rising and falling, and both involve trading the underlying price of the market rather than physically owning the asset. But there are also a range of key differences to be aware of before you start trading, ranging from tax implications, to how your position is structured, and more. 

Legal and tax

  • CFDs: in many countries, CFDs are subject to capital gains tax, but are exempt from stamp duty. They are also subject to regulation by financial authorities like the Financial Conduct Authority (FCA) in the UK.

  • Spread betting: in some jurisdictions like the UK, spread betting is free from both capital gains tax and stamp duty.*  

Calculation of P&L

  • CFDs: profits and losses are determined by the difference between the opening and closing prices of the contract multiplied by the number of units traded of the underlying asset.

  • Spread betting: profits and losses are determined by the difference between the opening and closing prices of the bet, multiplied by the stake per point movement.


  • CFDs: typically involve paying a spread (the difference between the buying and selling price) and sometimes a commission.

  • Spread betting: instead of a spread, traders pay a spread (the difference between the bid and ask price) through a wider spread. There are usually no commissions.

Regulation and trader protections

  • CFDs: generally, CFD trading is regulated by financial authorities in various jurisdictions, providing certain investor protections and oversight. The FCA is the relevant regulatory body in the UK.  

  • Spread betting: regulation depends on the jurisdiction, but in some cases, spread betting may have fewer regulatory requirements and investor protections compared to CFD trading.

Here’s a table showing the main similarities and differences between CFD trading and spread betting on our trading platform


CFD trading

Spread betting

Derivative product



Access to full range of asset classes



Commission payable 






Short selling



Ownership of underlying assets



Subject to capital gains tax*



Subject to stamp duty*



Structured by contracts



Structured by stake size per point



Does spread betting or CFD trading work better for me?

Whether to trade CFDs or spread bet is a personal decision based on consideration of the above factors. You might prefer the tax-free aspect of spread betting*, or you might enjoy the format of trading contracts with CFDs. With us, your portfolio can include both CFDs and spread bets across all the asset classes we offer. For example, with CFD trading, you can trade gold by the troy ounce, with one contract equating to one ounce. However, you might find it more convenient to trade a forex pair like EUR/USD through a spread bet, where you can trade your chosen amount per point of market movement.

Spread betting example

In the forex spread betting example below, you think GBP/USD will rise in value. You make a decision to go long on GBP/USD at £1 per point. Here, the GBP/USD price of 1.2453 is converted into our spread betting pricing of 12,453.

With a margin of 3.33% on this currency pair, the required margin for the position, or in other words the amount you have to put down, is therefore 3.33% of 12,453, which is £415.11.

Over a few hours, the price rises to 12,753, an increase of 300 points, and you close the position. You’ve made a profit of 300 X 1 = £300.

All the costs are included in the spread, but if you’d kept the position open overnight, or activated a guaranteed stop, these would impact the profit. For more information, please see the charges and fees page.

CFD trading example 

Now let’s compare that to the same market, but using CFD trading. You make a decision to go long on GBP/USD at a price of 1.24661 for 10,000 of the base currency (known as a mini-lot). At a margin of 3.33%, this means you have to put down £333.33.

Over a few hours, the price rises to 1.27661, an increase of 300 points, and you close the position. You’ve made a profit of (1.27661 - 1.24661) X 10,000 = £300.


Are spread betting and CFD trading tax-free?

Spread betting and CFD trading have tax-free elements* but their tax profile is different. In the UK CFDs are exempt from stamp duty but capital gains tax is payable. Spread bets are exempt from both capital gains tax and stamp duty in this jurisdiction.

What is the spread in a CFD?

The spread in a CFD is the difference between the buy and sell price (also known as the ‘bid’ and ‘ask’ price) of a given asset, and is the main way trading brokers make money. For example, if a share has a bid price of £100.20 and an ask price of £100.25, the spread is £0.05 (5 pence). This is the price you pay per contract traded. So if you trade 10 contracts, your spread cost would be 50p. For any CFD or spread bet, to open your position you will pay half the cost of the spread and the other half to close it. 

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.