Spread betting vs share dealing
Spread betting is a popular alternative to traditional buy-and-hold investing. Discover the main differences between spread betting and share dealing, and which method is right for you.
Spread betting vs investing and share dealing: key differences
Spread betting and investing are two ways to take a position on the future price of financial markets – while share dealing is a way to invest. There are a few main differences between the two, including:
How you get exposure
When you spread bet, you speculate on the underlying market price – without taking ownership of the asset. When you invest, you’ll take direct ownership of the underlying asset
How you profit
When you spread bet, you can take advantage of markets that are falling in price, as well as those that are rising. When you invest, you’ll only profit if the asset you hold increases in value
Which markets you can trade
When you spread bet, you can choose from 17,000+ markets – including shares, ETFs, forex pairs, indices, commodities and more. When you invest, you can deal on 16,000+ shares, ETFs and investment trusts
Spread betting is a form of derivatives trading that involves placing a bet on whether a market will rise or fall in price. You’d put up a certain amount of capital per point of movement, and your profit and loss is determined by the extent of the market movement multiplied by this bet.
Spread bets are popular among shorter-term traders as profit and loss is realised immediately – making it faster to open and close trades. However, this doesn’t mean you can’t use them for longer-term positions too. You’d just need to consider the costs involved in maintaining a position – such as overnight funding – and the bet duration as spread bets do have fixed expiries.
Learn more about what spread betting is
One of the largest benefits of spread betting is the use of leverage. This means you’ll only need to put up a fraction of the full value of the trade – known as margin – to get full exposure. While leverage can magnify your profits, it can also magnify your losses, so it’s important to create a risk management strategy.
As you don’t take ownership of the underlying asset, spread betting is completely tax-free.1
Investing involves buying and holding an asset for a long period of time in the hope that it increases in price so that you can sell it at a later date for profit.
Although you’ll have to pay the full value of your position upfront, you’ll never lose more than you put down. And, as you own the underlying asset, you would get shareholder rights, such as dividend payments if they’re made.
When you buy and sell shares, you have to pay stamp duty and capital gains tax on any profits that you make. But you can invest up to £20,000 in a tax-efficient ISA wrapper.1
Learn about investing with us
|Which markets are available?||17,000+ markets including shares, forex, commodities, indices and futures.||16,000+ global shares and ETFs.|
|What are the costs to open a position?||Average deposit on a share spread bet is 22.5% of the total position size.2||You’ll pay the full value of the position upfront.|
|Can you go short?||Yes, you can speculate on markets that are rising and falling in price.||No, you can only go long.|
|Are there any tax benefits?||Spread bets are completely tax free.1||You’ll pay stamp duty and capital gains tax on your profits, unless you use a tax-efficient ISA wrapper.1|
|What are the trading or dealing hours?||Spread bet around the clock on key global indices and popular currency pairs such as GBP/USD, EUR/USD and USD/JPY.3 We also offer weekend trading on selected markets and out-of-hours trading on 70+ US stocks.||Access our exclusive extended hours on over 70 US shares. Otherwise, deal when the underlying exchange or market is open.|
|Do you get shareholder privileges and dividends?||No, your positions will be adjusted to offset changes from dividends.||Investing in shares and ETFs entitles you to certain shareholder rights such as voting opportunities and dividends if they’re paid.|
Comparison of a shares spread bet vs share deal
Buying 2000 Barclays shares
|Spread bet||Share deal|
|Our prices||97.4 / 98.6||97.9p / 98.1p|
|Deal||Buy at 98.6||Buy at 98.1p|
|Deal size||£20 per point||2000 shares|
|Initial outlay||£394.4 (Margin = buy price x deal size x 20% margin factor)||£1962
(2000 shares at 98.1p)
|Close price||Sell at 108.5||Sell at 108.9p|
|Costs||No commission (cost is factored into the spread)
Spread betting charges and fees.
Share dealing charges and fees.
|Capital gains tax (CGT)||None1||Yes, depending on individual circumstances.1|
|Profit||(108.5 - 98.6) x £20 =
|([108.9 - 98.1] x 2000) - £3 - £10 =
£203 (before capital gains tax)1
The differences between spread betting and share dealing in detail
|Spread betting||Share dealing|
|What is it?||Placing a bet on an underlying market price rising or falling – without owning the asset.||The buying and selling of physical shares in a company or fund.|
|Are there expiries?||Yes, there are fixed expiry dates.||No.|
|Do I pay tax?||There’s no capital gains tax or stamp duty.1||You pay stamp duty on each trade, and capital gains tax on any profits, except those made from trades using a stocks and shares ISA.1|
|When can I trade?||During market hours for most markets. We offer 24-hour trading on forex and major stock indices, as well as weekend trading on selected markets and out-of-hours trading on 70+ US stocks.||Deal out-of-hours on 70+ US stocks. All other markets are available when the related exchange is open.|
|Do I pay to keep
|Overnight funding on daily funded bets, except forwards and futures which are rolled over.||No.|
|What kind of trading
is it suitable for?
|Intra-day, daily or medium-term.||Longer-term investing.|
|Can I receive dividends?||No, we make a dividend adjustment so there is no material impact on you.||Yes, if they are paid.|
|Can it be used for
|Yes.||Yes, but spread bets and CFDs are more effective.|
|Range of markets||17,000+ markets, including forex, shares, ETFs, indices, commodities, futures and options.||More than 16,000 shares, ETFs and investment trusts.|
|The charges||All spread bets are charged via the spread – there is no commission fee. Any positions held overnight will incur a funding charge (excluding futures and forwards).||You’ll pay a commission on all trades – which starts from just £0 on US shares and £3 on UK shares.4
Currency conversion fees on international shares also apply.5
|Dealing platforms||Web-based platform, mobile trading app and MetaTrader4||Web trading platform, mobile app and
|Direct market access
|No, but DMA is available with CFDs.||Yes, deal directly into the order books of exchanges.|
Spread betting requires less capital upfront than share dealing due to leverage. When you invest in a share, you will have to pay the full cost of the asset upfront. But when you spread bet, you’ll only need a fraction of the initial cost, known as a margin, to get full exposure.
Your positions could also be subjected to additional charges. For example, when you invest in shares, you would need to pay commission along with a custody fee, any other charges and tax. But when you spread bet, all the costs of trading are included in the spread, but you may be charged for overnight funding. Spread bets are exempt from tax.1
See our full list of charges.
When you spread bet, any profits are free from capital gains tax and stamp duty because you won’t take ownership of the underlying asset.1
Alternatively, if you decide to deal shares, you’d pay stamp duty on each investment and capital gains tax on any profits. Unless you invest via a tax-free stocks and shares ISA or SIPP.1
Settlement is the point at which cash is actually paid, or received, in exchange for shares. With share dealing, it usually takes two or three business days for the money to enter or leave your account after the trade is agreed.
When you spread bet, there is no settlement period. The profit or loss to your position is calculated immediately once you close your spread bet. This makes it much easier to enter and exit trades quickly.
If you hold a spread bet open on a share or stock index when a dividend payment is made, we will make an adjustment to your position. This means that capital will either be credited or debited to your account, depending on whether you have incurred additional running loss or profit. This ensures that the dividend payment has no material impact on your position.
If you buy a stock with our share dealing service, then you will receive dividends if the company pays them.
1Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2Average margin deposits for UK shares correct as of 2/10/2020. See our spread betting share charges.
3This excludes the 10 hours from 10pm Friday until 8am Saturday. Only selected indices and the GBP/USD forex pair are available for weekend trading.
4Deal three or more times in the previous month to qualify for our best commission rates.
5Changing your currency conversion settings influences the amount of commission you pay. Our team reviews these changes on a monthly basis, so it may take some time to update your account. Please be aware that changing from converting 'instant' to 'manual' means that you'll no longer qualify for commission-free trading.