Spread betting and contracts for difference (CFDs) are leveraged-based derivative products for trading on thousands of different financial markets. They enable traders to speculate on a security’s price without needing to own the underlying instrument.
The key differences
Spread betting and trading CFDs share many characteristics but there are some key differences. The main difference is the way they are treated for tax– spread bets are free from capital gains tax in the UK*, while CFDs are not.
- CFD trading is not tax free in the UK, while spread betting is
- CFD equity trades ask for a commission – spread bets on shares do not
Spread bets have a fixed expiry date. CFDs – excluding futures, binaries and options – do not have an expiry date.
With CFDs there is no need to pay stamp duty, but you do need to pay capital gains tax on profits. Losses can therefore be used to offset taxes elsewhere.
ETX Capital offers spread betting and trading on CFDs across thousands of markets. If you live in the UK, you may find that spread betting is better suited because it is tax free, although some UK-based investors still prefer CFDs.
|No Capital Gains Tax
but you cannot use losses to offset tax liabilities
|Capital Gains Tax to pay
but can use losses to offset tax liabilities
|No Stamp Duty
||No Stamp Duty
||No Commission (forex)
|Trade on rising and falling markets
||Trade on rising and falling markets
|Prices based on underlying market
||Prices based on underlying market
|Expiry dates on all spread bets
||No expiry dates
except on futures, binaries and options
* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.