Same markets, the same leverage rules, very different tax. A plain-English guide for UK traders, with a margin and risk calculator built on the FCA's limits.
Both let you trade the price of a market, such as GBP/USD or the FTSE 100, without owning it, and both use leverage. The differences are in how you size a trade and how it's taxed.
| Spread betting | CFDs | |
|---|---|---|
| How you size a trade | A stake in pounds per point, e.g. £2 per point | A number of units or lots, in the market's own currency |
| Profits and tax | No Capital Gains Tax or income tax for most UK residents | Capital Gains Tax at 18% or 24% on gains above the £3,000 annual allowance |
| Losses and tax | Can't be set against other gains | Can be offset against other capital gains, and carried forward if reported |
| Stamp duty | None | None |
| Leverage limits | Identical. The FCA's rules cover spread bets and CFDs in exactly the same way. | |
| Who can use it | UK and Irish residents | Widely available, including outside the UK |
| Main costs | The spread, plus overnight funding on positions held past the close | The spread (or commission on shares), plus overnight funding |
You think the FTSE 100 will rise from 10,000, and it goes to 10,050: a move of 50 points.
| Stake | £5 per point |
| Position size | £50,000 |
| Margin at 20:1 | £2,500 |
| Profit | 50 × £5 = £250 |
| Tax on the profit | None |
| Size | 5 units (£1 per point each) |
| Position size | £50,000 |
| Margin at 20:1 | £2,500 |
| Profit | 50 × £5 = £250 |
| Tax on the profit | Counts towards your £3,000 allowance |
The trade itself is identical: same exposure, same margin, same risk. If it had fallen 50 points instead, both would lose £250. The only real difference is what happens at tax time.
For most UK residents, yes. HMRC treats spread betting as betting, so profits sit outside Capital Gains Tax and income tax. There are two catches worth knowing.
It works both ways. Because a spread bet isn't an investment for tax purposes, a losing spread bet gives you no tax loss. You can't set it against gains on shares, property or anything else. A CFD loss, reported on your tax return, can be.
It's rarely treated as a business. HMRC's guidance is that spread betting isn't normally a trade, and simply being full-time or profitable doesn't change that on its own. Unusual cases, and anything done through a limited company, can be treated differently.
For retail clients, these are the maximums a UK-regulated broker can offer, for spread bets and CFDs alike. Leverage of 30:1 means you put up 3.33% of the position as margin.
| Market | Max leverage | Minimum margin | Examples |
|---|---|---|---|
| Major currency pairs | 30:1 | 3.33% | Any two of USD, EUR, GBP, JPY, CAD and CHF: EUR/USD, GBP/USD, USD/JPY, EUR/GBP, GBP/JPY |
| Other currency pairs, gold and major indices | 20:1 | 5% | AUD/USD, NZD/USD, gold, FTSE 100, DAX, S&P 500, Nasdaq 100, Dow |
| Other commodities and smaller indices | 10:1 | 10% | Oil, silver, natural gas |
| Individual shares | 5:1 | 20% | Apple, Barclays, Tesla |
| Crypto | Not available. The FCA has banned crypto CFDs and spread bets for retail clients since January 2021, and in 2026 confirmed that ban stays. | ||
See what a trade really commits you to before you place it. Margin is shown at the FCA maximum leverage; your broker may ask for more.
Point sizes for gold and oil vary between brokers (some quote gold per 10 cents), so check your broker's contract details. Stops can slip past their level in fast markets or over a weekend gap unless they're guaranteed. For sizing a trade from your risk, see the trading calculators.
| Negative balance protection | You can't lose more than your account |
| Margin close-out | Positions closed at 50% of required margin |
| No sign-up bonuses | Cash or gift incentives to trade are banned |
| Risk warning | The % of retail accounts that lose money |
Check the FCA register. Search the firm's name and reference number on the FCA register, and make sure the website and phone number match. Scammers regularly clone real firms.
Read the costs. Compare spreads on your markets (especially around news), overnight funding rates and the price of guaranteed stops.
Spread betting tends to suit UK residents who expect their profits to go above the £3,000 allowance, and who like sizing trades in simple pounds per point.
CFDs tend to suit traders outside the UK, anyone who wants losses to count against other gains, and those who prefer commission-based pricing on shares.
For many people starting out the tax difference is zero, so choose on costs and on the quality of the broker. And if you're not yet consistently profitable in a demo account, the most useful protection isn't a tax rule: it's trading small.