Spread Betting vs CFDs: 7 Real Differences From a Decade of Using Both

Are spread bets and CFDs basically the same product?

Mostly, yes. Both let you speculate on whether a market will rise or fall, using leverage, without owning the underlying asset. Both cover the same instruments (forex, indices, shares, commodities) and both are regulated by the FCA under the same leverage caps. I have held and traded both since 2018 and for the first year I could barely tell the difference at the execution level.

What separates them is not how you trade but what happens around the trade: what HMRC takes, what currency your profit lands in, whether you can claim losses back, and how your broker structures access to the underlying market. Those seven distinctions are what this page covers.

1. Spread bet profits are tax-free. CFD profits are not.

This is the headline difference and the reason most people ask me the question. In the UK, spread betting is classified as gambling in law, so profits are exempt from capital gains tax and stamp duty. CFD profits are subject to CGT at 18% (basic rate) or 24% (higher rate) after the £3,000 annual exempt amount for 2025/26.

I see it most clearly on my own FTSE 100 trades. The same £5,000 profit produces two very different outcomes depending on which account I placed it in:

£480 on a modest £5,000 profit. In a good year, when my trading profit reaches £20,000, the CGT bill on the CFD side climbs to £4,080. On the spread bet side I keep all of it. That gap is large enough that it swallows any small cost advantage a CFD gives me elsewhere, which is why my index and forex positions live on the spread bet account.

2. CFD losses can reduce your tax bill. Spread betting losses cannot.

This is the difference most comparison pages bury, and it is the one I wish someone had spelled out for me in my first year. Spread betting losses carry no tax benefit at all. CFD losses are a form of capital loss that can be offset against any other capital gain in the same tax year, whether that is a profitable property sale, shares sold outside an ISA, or anything else that triggers CGT. When I was losing money learning the ropes, that distinction would have mattered to me, and I did not understand it at the time.

A £3,000 CFD loss that sits alongside a profitable property disposal reduces your real-money tax bill by £720. The same spread betting loss reduces only your account balance. So when people ask me which product to start on, my honest answer surprises them: if your first year is likely to go the way most first years go, and you have other gains in the same tax year, the CFD account quietly costs you less overall, even though the two look identical at the point of trade.

3. Spread bet P&L is always in GBP. CFDs expose you to the underlying currency.

Every spread bet you place settles in sterling, regardless of what market you trade. Buy an S&P 500 spread bet from Leeds and your profit or loss lands in pounds. No currency conversion, no secondary FX position sitting on top of your market view.

A CFD on Tesla, by contrast, is priced in US dollars. Your P&L converts to GBP at the prevailing exchange rate when you close. That means you are running two simultaneous positions: one on Tesla’s share price, and one on GBP/USD. I have had trades where the stock moved correctly but the dollar weakened enough to turn a gain into a wash. On UK indices and major forex pairs, the difference narrows. On overseas equities, it is a real and often overlooked cost.

4. CFDs charge commission on individual shares. Spread bets do not.

On indices and major forex pairs, both products wrap their cost into the spread, so I barely notice the difference. On individual share positions it is another story: CFDs add a commission on top. IG charges me 0.10% per side on UK share CFDs with a £10 minimum. On a £500 position, that is £10 in and £10 out, a minimum £20 round-trip cost before the spread. The same trade on my spread bet account has no commission line at all.

Because most of my trading is index and forex, this rarely bites me, both products use spread-only pricing there. But the first time I built a position in individual UK shares on the CFD account, the commission was a cost I had not modelled, and it changed the maths on a trade I thought was cheap. If you trade single equities, work it out before you open, not after.

5. CFDs give you direct market access on equities. Spread bets route through the broker.

On share CFDs, most serious brokers offer Direct Market Access (DMA), meaning your order goes straight to the exchange order book and gets filled at the best available price. On spread bets, the broker acts as counterparty and sets its own price around the underlying. For the liquid indices and forex I trade day to day, this makes no difference I can measure. Where I have noticed it is on a larger or thinner equity position, where DMA gave me a visibly tighter fill. I use IG’s L2 Dealer platform for that, and DMA is not available on the spread bet account. If you trade individual equities at size, it is worth having.

6. CFD profits must be reported to HMRC. Spread betting profits do not.

Because spread betting is legally classified as gambling, HMRC has no interest in my spread bet profits or losses. They do not appear on my self-assessment return at all. In the years I traded spread bets only, my January was genuinely simpler, and I did not need to pay anyone to handle the trading side of my return.

CFD profits and losses are a different matter. They are capital events and have to be reported under the capital gains section of self-assessment. When my gains exceed the annual exempt amount, CGT is due; when I have losses to carry forward or offset, those get reported too. The overhead is not enormous, but it is real, and once I started running a CFD account alongside the spread bets it added to what my accountant charges me each year. Factor that in when you weigh the two.

7. The minimum position size is lower on spread bets at most brokers.

On IG, the minimum spread bet stake is £0.50 per point. A CFD is priced by contract, and the minimum depends on the instrument. When I was learning to size positions, that lower spread bet minimum was a quiet gift: I could put on real trades small enough that a loss taught me something without hurting. I found the same control harder to get on a contract-based CFD, where the minimum notional exposure sits higher. On indices in particular it matters more than the product page makes it look, and I would point a beginner at the spread bet account for that reason alone.

Which UK brokers offer both spread betting and CFDs?

Most of the top UK-regulated brokers I have funded offer both products, but the account structure varies more than you would expect. Spreadex is the only broker I tested that puts spread betting and CFDs inside a single combined account. Everyone else runs them as separate accounts, though the better ones, IG being the one I use, let you switch between them on one login. The figures below are the ones I recorded myself during the Jan to April 2026 test window on a wired Suffolk connection, not numbers lifted from a fact sheet.

IG is TIC’s recommended starting point for traders new to either product. Spreads tested during London session, Jan to Apr 2026. Pepperstone’s 0.1 pip EUR/USD spread is on the Razor account, which adds a £2.25 per lot per side commission. Spreadex has no demo account available. City Index CFD ranking is not available in our current test cycle (n/t). All five are FCA authorised. Full spread betting broker reviews and CFD broker reviews cover each in depth.

Which account should you open first?

When someone asks me this directly, I walk them through three questions:

Are you likely to be profitable in your first year? If the honest answer is no, and for most of us starting out it is, I would start you on a CFD account. Any losses you make can reduce your CGT bill elsewhere. Spread betting losses carry no tax value, and I learned that the hard way.

Do you mainly trade UK indices and forex? Then spread betting is the better structure, and it is where I keep that part of my own book. Your P&L is automatically in sterling, there is no CGT on gains, and nothing to report in January.

Are you trading individual overseas equities or hedging a share portfolio? This is exactly what I use my CFD account for. You get DMA access and tax-deductible losses, and both matter for that job in ways a spread bet cannot match.

Most experienced UK traders end up running both. I do. The spread bet account handles my index and forex positions. The CFD account handles overseas equities and portfolio hedges. They sit on the same IG login and switching between them takes about ten seconds.

Why I run both on IG, and where I would tell you to start

If you are new to leveraged trading, start on a demo account. Not because the products are hard but because the fastest way to understand how stakes, overnight financing, and margin calls actually work is to run real positions with virtual money, where mistakes are educational rather than expensive.

IG’s demo gives you £10,000 of virtual funds and the full live platform: both spread bet and CFD account types, the same price feeds, the same cost structure. Spend two weeks there before a penny is real. You will see overnight financing accumulate, you will understand what a margin call looks like before one happens to your real account, and you will get a feel for how the two products sit differently.

When you are ready for a live account, use the three questions above. If you want to compare the demo accounts available across all the main brokers, I cover them in my guide to trading demo accounts that reflect real conditions. If you have already decided on spread betting and want to compare platforms side by side, the spread betting brokers I rate is the next page.

Open a free IG demo and try both products

FAQs

References

1. HMRC Capital Gains Manual CG56100: Spread Betting. Confirms no chargeable gains or allowable losses arise from spread betting. Updated July 2025.
2. HMRC Business Income Manual BIM22017: Gambling. Clarifies that systematic spread betting does not automatically constitute a trade for tax purposes.
3. GOV.UK: Capital Gains Tax Rates and Allowances. Confirms the £3,000 annual exempt amount for 2025/26 and CGT rates of 18% (basic rate) and 24% (higher rate) on financial assets.
4. FCA PS19/18: Restricting contract for difference products. Full text of the permanent leverage caps, 50% margin close-out rule, and negative balance protection requirements applicable to both spread bets and CFDs.
5. TIC Broker Testing Dataset Q1 2026. Spread, execution, and fee data tested Jan to Apr 2026 from a wired FTTP 1Gb connection in Suffolk by Thomas Drury. Covers 18 FCA-regulated brokers.