Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Exchange-traded funds offer diversified market exposure in a single trade, typically at lower cost than actively managed funds. They can be held in an ISA, SIPP or share dealing account and traded like shares throughout the day. This guide covers how to invest in ETFs in the UK, including how to choose between them and how tax works.
An exchange-traded fund is a pooled investment vehicle that tracks an index, sector, commodity or other asset. It holds a basket of underlying securities, and its price moves in line with the performance of those holdings throughout the trading day. ETFs trade on stock exchanges exactly like shares: you can buy and sell them at any point during market hours at the prevailing market price.
What is an ETF and how does it work?
An exchange-traded fund is a pooled investment vehicle that tracks an index, sector, commodity or other asset. It holds a basket of underlying securities, and its price moves in line with the performance of those holdings throughout the trading day. ETFs trade on stock exchanges exactly like shares: you can buy and sell them at any point during market hours at the prevailing market price.
Most ETFs are passive investment instruments designed to replicate the returns of an index rather than beat it. This simplicity, combined with low ongoing charges, makes them one of the most cost-effective and widely used investment instruments available to UK retail investors. Our stocks and shares ISA allows you to hold ETFs with all gains and income sheltered from UK tax permanently within the £20,000 annual allowance.
How to invest in ETFs in the UK
1. Choose your account type
Most long-term ETF investors use a stocks and shares ISA for the tax efficiency, or a SIPP for retirement savings with upfront tax relief. A general share dealing account suits amounts above the £20,000 ISA limit. All three account types allow you to hold ETFs and buy and sell them during market hours.
2. Decide which type of ETF exposure you want
The first decision is what you want your ETF to track. The most popular choice for UK investors is a broad global equity index, providing exposure to hundreds or thousands of companies across developed markets in a single trade. FTSE 100 trackers are widely held for UK equity exposure, while S&P 500 trackers provide pure US market exposure. Thematic ETFs focus on specific sectors such as AI, clean energy or technology. UK ETFs and global ETFs are covered in detail in their respective guides.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
The value of shares, ETFs and other ETPs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
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Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd, cryptoassets services are provided by IG Digital Assets Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at 88 Wood Street, London, EC2V 7QR. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
3. Compare ETFs on cost and structure
For two ETFs tracking the same index, the most important differentiator is the ongoing charge figure (OCF), also called the total expense ratio (TER). This is the annual percentage fee deducted from the fund's assets. For major index ETFs, OCFs range from 0.03% to 0.25%. Over a 20-year holding period, this difference compounds significantly. The differences between index funds and ETFs also matter for cost: ETFs involve bid-offer spreads when trading; traditional index funds do not.
4. Choose between accumulating and distributing
Accumulating ETFs reinvest dividends within the fund, which suits ISA investors who want growth without receiving cash payments. Distributing ETFs pay dividends out as cash. For most ISA investors focused on long-term growth, accumulating is typically more efficient since dividends are automatically reinvested without dealing costs. For income-focused investors or those in drawdown, distributing suits better.
5. Place your order
Search for the ETF by name or ticker symbol on our platform. Review the current price and the bid-offer spread. Place a market order (executes at the current available price) or a limit order (only executes if the price reaches your specified level). For UCITS ETFs listed on the LSE, settlement is T+2.
ETF investing: key facts
0.03%
Lowest OCF available on S&P 500 UCITS ETFs for UK investors (SPDR UCITS, SPY5)
£20,000
Annual ISA allowance for 2026/27, within which ETF gains and income are permanently tax-free
11,000+
Global shares and funds available on our platform, including the widest range of UCITS ETFs
A FTSE tracker ISA: the most popular starting point
For many UK investors, a FTSE 100 or global equity tracker held in a stocks and shares ISA is the most common first ETF investment. The iShares Core FTSE 100 UCITS ETF (ISF) and the Vanguard FTSE All-World UCITS ETF (VWRL) are among the most widely held UK-listed ETFs, offering either UK equity or global diversified exposure at OCFs of 0.07% and 0.22% respectively.
Holding either within a stocks and shares ISA means dividends and capital gains accumulate tax-free permanently, regardless of how large the position grows over time. There is no time limit on the tax-free protection and no restriction on how large the fund can become. The annual allowance only restricts how much can be contributed each tax year, not how much can be held.
Trading ETFs with spread bets and CFDs
For shorter-term traders, we offer spread bets and CFDs on major ETFs, providing leveraged exposure to index performance without owning the underlying fund. This allows you to go short on an ETF (profiting from a decline in the index) or take a leveraged long position. These are not investment products: they are leveraged derivatives suited to short-term tactical positions. Spread bet profits are free from CGT.
For investors who want to access US-listed ETFs such as the SPDR S&P 500 ETF Trust (SPY), direct investment by UK retail investors is restricted under PRIIPs regulations. UCITS equivalents listed on UK exchanges are the accessible alternative for long-term investment. For spread betting and CFD trading, many US-listed ETFs remain accessible through our platform.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with us. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Robust risk management strategies, including stop-loss orders, should be understood and used to prevent losses beyond a set level.
