Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% 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.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

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.

Start trading today. Call 0800 195 3100 or email newaccountenquiries.uk@ig.com. We’re available from 8am to 6pm (UK time), Monday to Friday.

Contact us: 0800 195 3100

Start trading today. Call 0800 195 3100 or email newaccountenquiries.uk@ig.com. We’re available from 8am to 6pm (UK time), Monday to Friday.

Contact us: 0800 195 3100

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

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

Spread betting uses 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. And although your initial outlay is a small percentage of the position’s value, your profits and losses are calculated based on the full position amount. While leverage can magnify your profits, it can also magnify your losses, making spread betting somewhat riskier than share dealing. 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

Discover the benefits of spread betting

Investing

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.

Unlike spread betting, which makes use of leverage, you’ll have to pay the full value of your position upfront. However, this also means that you’ll never lose more than you put down – an inherent risk of trading CFDs. 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

Remember, spread bets are leveraged. Leverage can magnify your profits and losses as both will be based on the full exposure of the trade, not just the margin required to open it. This means losses as well as profits could far outweigh your margin, so always ensure you’re trading within your means.

Spread betting vs investing in brief

Get an overview of spread betting vs investing, or see the differences in detail.

Spread betting Investing
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.

Spread betting on shares vs share dealing

Investing in shares and ETFs is also known as share dealing. You’d pay the full value of the asset upfront and take ownership of the shares. It is a means of participating in a company’s growth and capitalising on it should they pay dividends.

Discover share dealing with us

For anyone looking to take a shorter-term, more speculative position on shares, spread betting could be the better option. You can trade whether a market is rising or falling in value, enabling you to take advantage of companies and sectors that are experiencing periods of growth and periods of decline.

Comparison of a shares spread bet vs share deal

Buying 2000 Barclays shares

Spread bet Share deal
Underlying price 98p 98p
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.
£3 commission4
Share dealing charges and fees.
Stamp duty None1 £101
Capital gains tax (CGT) None1 Yes, depending on individual circumstances.1
Profit (108.5 - 98.6) x £20 =
£198
([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
positions open?
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
hedging?
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
L2 Dealer
Direct market access
(DMA)
No, but DMA is available with CFDs. Yes, deal directly into the order books of exchanges.

FAQs

Is spread betting cheaper than share dealing?

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.

How do CGT and stamp duty compare for spread betting and share dealing?

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

How do settlement periods compare for spread betting and share dealing?

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.

How are dividends paid for spread bets and share dealing?

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.

Is online trading safe?

Your security while trading online is ultimately in the hands of your provider. 256-bit SSL (secure sockets layer) encryption – used by IG – is the current industry standard for online financial transactions. Some providers also offer two-factor authentication for added account security.

Develop your spread betting knowledge with IG

Find out more about spread betting and test yourself with IG Academy’s range of online courses.

Develop your spread betting knowledge with IG

Find out more about spread betting and test yourself with IG Academy’s range of online courses.

Try these next…

Discover the differences between spread betting and CFD trading

Learn about risk management tools including stops and limits

Browser-based desktop trading and native apps for all devices

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.