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CFDs vs spread betting

Spread betting and CFD trading share many benefits, and there are key advantages unique to each

Watch Sara explain the key differences in our video guide and see more details in the overall comparison table below. 

All trading involves risk. Losses can exceed deposits.

Spread betting

  • No capital gains tax*
  • No commission, just our spread
  • Easy to bet in the currency of your choice – greater control of currency exposure
  • Deal on rising and falling markets
  • Leveraged access to the markets
  • No stamp duty
  • 24-hour dealing
  • Use prices based on the underlying market

CFDs

  • Direct market access (DMA) on forex and shares
  • Trade at the market price on shares
  • Losses can be offset against profits for tax purposes
  • Deal on rising and falling markets
  • Leveraged access to the markets
  • No stamp duty
  • 24-hour dealing
  • Use prices based on the underlying market

Which is best for me?

If you’re experienced in the financial markets, both spread betting and CFD trading can bring variety and range to your portfolio. You can see a full comparison in the table below.

Spread betting could be for you if...

  • You want any profits to be tax-free*
  • You want to control the size of your deal
  • You want to deal shares in smaller sizes and not be penalised by a minimum commission
  • You want to deal all international markets in sterling
  • You want to take a longer term view on forex and shares with forward markets

CFD trading could be for you if...

  • You're already comfortable with the underlying market and its terminology, so want a product that feels similar
  • You want to use DMA for shares and forex trading, while getting our OTC benefits
  • You want to offset losses against profits as a tax deduction
  • You want a corporate or professional trading account
  • You are hedging physical assets in your portfolio
  • You want an efficient way to hedge using the tax-deductible benefits of CFDs 

What are the technical differences?

A financial spread bet allows you to speculate on the financial markets; you are not trading the markets, you're betting on a range of potential outcomes based on the underlying data. All spread bets have a fixed expiry date.

CFD is a financial derivative: you trade a contract based on prices derived from the underlying market. Via DMA, you trade a CFD and we place a parallel trade in the market. CFDs don’t expire, excluding futures, digital 100s and options.

The differences in detail

 

Spread betting

CFD trading

What is it? The placing of a bet that allows for a range of outcomes. Trading a financial derivative – you deal on prices derived from the underlying market, not on the underlying market itself.
Are there expiries? Fixed expiry dates. No expiry dates (excluding forwards, options and digital 100s).
Do I pay tax? You don’t pay capital gains tax or stamp duty*. You don’t pay stamp duty, but you do pay capital gains tax. However, losses can be offset as a tax deduction.
When can I trade? 24-hour dealing on forex and major stock indices. During the underlying market hours for other markets. We also offer weekend trading on selected markets. 24-hour trading on forex and major stock indices. During the underlying market hours for other markets. We also offer weekend trading on selected markets.
Do I pay to keep positions open? Overnight funding on daily funded bets. Rollovers on forwards and futures. Overnight funding on all markets, except futures. Rollovers on futures.
Does IG profit if I lose?  We profit primarily from spreads and funding, and hedge the majority of net client exposure. We accept a low level of risk, from which we can make a small profit or loss.

We profit primarily from commission, spreads and funding, and hedge the majority of net client exposure. We accept a low level of market risk, from which we can make a small profit or loss. 

 

The outcome of a client’s DMA trade never has an impact on our profit or loss.

What kind of trading is it suitable for?

Intra-day

Daily

Medium-term

Intra-day

Daily

Medium-term

Can I receive dividends?

We make a dividend adjustment on equity and stock index spread bets.

We make a dividend adjustment on equity and stock index CFDs.

Can it be used for hedging?

Yes, but CFDs can be more effective because of their tax-deductible benefits.

Yes

Can I open a corporate account?

No

Yes, we offer corporate accounts.

Range of markets

More than 10,000 markets, including:

 

Forex

Stock indices

Shares

DMA forex

DMA shares

ETFs and ETCs

Metals

Energies

Spot metals

Soft commodities

Options

Digital 100s

Interest rates

Bonds

Sectors

Share forwards

Forex forwards

Daily stock index futures

Stock index futures

Daily oil futures

More than 10,000 markets, including:

 

Forex

Stock indices

Shares

DMA forex

DMA shares

ETFs and ETCs

Metals

Energies

Spot metals

Soft commodities

Options

Digital 100s

Interest rates

Bonds

Sectors

Stock index futures

Share forwards

Forex forwards

Daily stock index futures

Daily oil futures

The mechanics of dealing

You define the size of your deal by selecting the amount you want to bet per point of movement (£/pt).

 

Profits and losses realised in currency you bet in.

You define the size of your deal by selecting the number of contracts or shares you want to trade. Each contract has a fixed value. 
 
Profits and losses realised in traded market’s base currency. GBP contracts available.
The charges

A spread on all markets.

No commission.

Funding adjustments (excluding futures and forwards).

A spread on all markets except shares.

We charge a commission on share CFDs, but no spread.

Funding adjustments (excluding futures).

Dealing platforms

Desktop dealing 

Mobile app (iPhone, Android, Windows) 

Tablet app (iPad) 

DMA

MetaTrader 4

ProRealTime

Desktop dealing (OTC & DMA)

Mobile app (iPhone, Android, Windows)

Tablet app (iPad)

L2 Dealer (DMA)

MetaTrader 4

ProRealTime

Direct market access

No

Yes, for forex and shares

Getting started

Introduction programme

Interactive platform preview

Demo account

Introduction programme

Interactive platform preview

Demo account

Example trades

Selling FTSE example

 

Spread bet

CFD

Date and time    
Underlying market value

FTSE 100 6200

Our price 6199.5-6200.5 6199.5-6200-5
Deal

Sell at 6199.5

Sell at 6199.5

Deal size £10 per point One contract
Each contract is worth £10 per point
Margin required £250
Margin factor x deal size
£250
Margin per contract x no. of contracts
What happens next? The market falls to 6150 by 10pm. This is the price our funding is calculated at. It continues to fall steadily until the next day, reaching 6120.
Funding

Overnight funding charge of £3.38
(One-month Libor (eg 0.4925%) minus 2.5% x value of deal x underlying level at 10pm) / 365

(-2.0075% x £10 x 6150) / 365

Overnight funding charge of £3.38
(One-month Libor (eg 0.4925%)  minus 2.5% x value of deal x underlying level at 10pm) / 365
(-2.0075% x £10 x 6150) / 365

Underlying market 6120
Close

Buy at 6120.5

Buy at 6120.5

Overall market movement and profit/loss

6199.5 – 6120.5 = 79
Value of one point = £10
Gross profit = 79 x £10 = £790

6199.5 – 6120.5 = 79
Value of one point = £10
Gross profit = 79 x £10 = £790

Costs

1 pt spread: the underlying fell by 80 pts, but you benefited from a fall of 79.
Funding deducted from cash balance: £3.38

1 pt spread: the underlying fell by 80 pts, but you benefited from a fall of 79.
Funding deducted from cash balance: £3.38

Net profit £786.62 tax-free £786.62 subject to tax
What if...

If the underlying market rose to 6280 pts instead:
6280.5 – 6199.5 = 81 pts
81 x £10 + £3.44 (higher funding cost to account for higher market close at 10pm)
£813.44 net loss

If the underlying market rose to 6280 pts instead:
6280.5 – 6199.5 = 81 pts
81 x £10 + £3.44 (higher funding cost to account for higher market close at 10pm)
£813.44 net loss

In the above example, the profit and net loss for placing this trade via spread bet or CFD is the same.

However, while spread bets are tax-free and you keep all your profit, CFDs can be subject to capital gains tax, depending on individual circumstance.

Because CFDs are subject to tax, you can offset losses you make via CFD as a tax deduction.

Please note that tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

Buying GBP/USD: detailed

Buying GBP/USD: detailed

  Spread bet DFB CFD
Market Spot GBP/USD
Price

15,579.7/15,580.5

1.55797/1.55805

Deal

Buy £10 a point at 15,580.5

Buy 1 contract at 1.55805 (1 contract = £100,000)

Margin required One contract is £100,000 and the margin rate is 0.5% = £500
What happens next? GBP/USD climbs one hundred points into the next day. 
Funding

Funding = size x (daily tom-next rate + admin fee of 0.0022% per day)

£10 x 1.05 = £10.50

Funding = size x (tom-next rate + admin fee of 0.3% pa)

£10 x 0.25 = £2.50

Price 15,695 - 15,695.8 1.5695 - 1.56958
Close

You sell at 15,695

You sell at 1.5695

Gross profit

£1145

15,695 – 15,580.5 = 114.5

Value per point = £10

114.5 x £10 = £1145

£1145

1.5695 – 1.55805 = 0.01145

Number of contracts = 1

Value per contract £100,000

0.01145 x £100,000 = £1145
Costs

0.8 point IG spread (included)

Funding cost = £10.50

0.8 point IG spread (included)

Funding cost = £2.50
Net profit

£1134.50 tax free*

£1142.50

What if...

If the market dropped 114.5 points instead:

£1145 + £10.50

Net loss = £1155.50

If the market dropped 114.5 points instead:

£1145 + £2.50

Net loss = £1147

 

What are DFBs?

Daily funded bets (DFBs) are long-term bets on the cash price of an underlying instrument. DFBs have no expiry date, so we make a cash adjustment to your account to reflect funding charges.

Why do CFD and spread betting FX prices look different?

  • You trade forex via CFD in contracts or lots. We therefore display CFD forex prices in the same way you would expect to see them on an FX exchange: e.g. 1.31425
  • Because you spread bet on forex in currency per point, we display prices differently e.g. 13142.5. This makes it easier to see per point movements.

This makes no difference to the price you deal at or your potential profit or loss: it simply makes it easier to track per point movements.

*Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

Buying GPD/USD

Buying GBP/USD

  Spread bet DFB CFD
Market Spot GBP/USD
Price

15,579.7 - 15,580.5

1.55797 - 1.55805
Deal

Buy $10 a point at 15,580.5

Buy 1 contract at 1.55805 (1 contract = £100,000)

Margin required One contract is £100,000 and the margin rate is 0.5% = £500
What happens next? GBP/USD climbs over one hundred points. 
Price 15,695 - 15,695.8 1.5695 - 1.56958
Close

You sell at 15,695

You sell at 1.5695
Gross profit

 

Gross tax-free* profit = £1145
 

15,695 - 15,580.5 = 114.5

Value per point = £10

114.5 x £10 = £1145

 

 

 

Gross profit = £1145


1.5695 - 1.55805 = 0.01145

Value per contract = £100,000

0.01145 x £100,000 = £1145

What if...

If the market dropped 114.5 points instead:

Gross loss = $1145


To calculate your net profit or loss, you would need to factor in any funding charges. See our detailed example for more information.

What are DFBs?

Daily funded bets (DFBs) are long-term bets on the cash price of an underlying instrument. DFBs have no expiry date, so we make a cash adjustment to your account to reflect funding charges.

Why do CFD and spread betting FX prices look different?

  • You trade forex via CFD in contracts or lots. We therefore display CFD forex prices in the same way you would expect to see them on an FX exchange: e.g. 1.31425
  • Because you spread bet on forex in currency per point, we display prices differently e.g. 13142.5. This makes it easier to see per point movements.

This makes no difference to the price you deal at or your potential profit or loss: it simply makes it easier to track per point movements.

*Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

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It's free to open an account, takes less than five minutes, and there's no obligation to fund or trade.

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* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

Contact us

We're here 24hrs a day from 8am Sunday to 10pm Friday,
and 9am to 5pm Saturday.

0800 409 6789

You can also call 0207 896 0079 or
email helpdesk.uk@ig.com