Which product is right for me?
Spread betting and CFD trading both provide access to shares, indices, commodities and currencies using leverage. However, there are key distinctions between the two products.
Spread betting
Spread betting is the commission free way to trade global markets. Profits made from spread betting are exempt from UK capital gains tax and stamp duty. Tax treatment depends on individual circumstances.
If you are over the age of 18 and reside in the UK you are eligible to apply for a spread bet account. Visit the benefits of spread betting for a more detailed explanation.
When you trade using a spread bet, you simply choose whether the price of that instrument is likely to go up or down and decide how much to stake. The minimum bet size is £1. If the instrument moves in your favour, your profit is calculated by your original stake size multiplied by the number of points the instrument has moved. If it goes against you, your loss will be calculated in the same way. For a more thorough explanation, see our spread betting example trade or visit our spread betting simulator
CFD trading
CFDs or contracts for difference, provide an equally accessible way to trade the global financial markets. Similar to spread betting, CFD trading is exempt from stamp duty but importantly, profits are not exempt from capital gains tax. There are, however, circumstances where certain losses made on your CFD trading can be offset against gains which can be a consideration for eligible individuals. This feature is not available with a spread betting account. CFDs can be a more suitable product for individuals outside of the UK and Ireland that are over the age of 18 wishing to trade the financial markets. Visit the benefits of CFD trading for a more detailed explanation.
CFDs allow you to trade on whether the price of a financial instrument is likely to go up in value, or down in value. Instead of nominating an amount in sterling per point and betting on the price movement, you buy or sell each contract known as a contracts for difference or CFDs.
Your profit or loss is determined by the difference between the price you buy at and the price you sell at multiplied by the amount of CFDs you hold. This also gives you the opportunity to profit whether a market is rising or falling. See our CFD example trade for more detail.
