Spread Betting Vs CFDs – Advantages and Disadvantages

The key similarities:

• No stamp duty is paid on transactions
• You do not own the shares or underlying security and you have no voting rights.
• Margin trading is used to leverage up your capital.
• You can trade thousands of markets and go long or short with both.

The key differences:

• Spread betting is exempt from Capital Gains Tax, CFD trading is not. Tax laws are subject to change though and tax treatment may depend on the individual.
• Losses on CFDs can be offset against capital gains, this is not allowed with spread bets
• When trading CFDs, you trade in a similar manner to purchasing shares – i.e. you buy 10,000 shares of BP. With spread betting you trade in pounds per point (or dollars/euros) – so for 10,000 shares in BP you would instead stake £100 per point movement in the share price. If BP goes up by 10p, your 10,000 shares makes £1,000, as does your spread bet.