Spread betting vs share dealing

Spread betting and share dealing both enable you to take a position on the price of company shares. When you invest, you’d buy the stock outright in the hope of selling it on for a profit. But when you spread bet, you’re speculating on the price movements of the underlying market. Discover the key differences between spread betting and share dealing.

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What is the difference between spread betting and share dealing?

The main difference between spread betting and share dealing is that when you spread bet you never take ownership of the underlying asset because you are speculating on its price. Spread betting on shares is known as ‘share trading’ and contrasts with traditional investing, where you are buying and taking ownership of the underlying shares with the intention of selling them for a profit at a later date.

Learn more about what spread betting is and how it works.

One implication of this is that you can take advantage of leverage when you spread bet, which means you’ll only need to put up a fraction of the full value of the trade – the ‘margin’ – to gain full exposure. Although leverage can magnify your profits, it can also lead to magnified losses as both are calculated on the full value of your trade.

However, when you buy shares, you’ll need to pay the full cost of your position upfront, but this means that you cannot lose more than you invest.

Spread betting vs share dealing

What are the advantages of spread betting vs share dealing?

Spread betting and share dealing both offer ways to take advantage of movement in share prices. Here we’ve outlined the key differences between spread betting and share dealing to help you decide which is best for you.

Spread betting Share dealing
Trade a wide range of markets, including shares,
indices, forex and commodities
Trade only shares and ETFs
Free from tax and stamp duty* Trade via a stocks and shares ISA or SIPP for tax-free profits*
Trade using leverage to open a position for a fraction
of the full value of the trade
Pay the full value of your shares up front
Losses can exceed deposits, but retail clients
benefit from negative balance protection
Limit risk to your initial outlay
Go long or short on a market’s direction Deal only on rising prices
Dividend adjustments offset any changes in
the price of the underlying market
Receive dividends (if paid)
Commission free – costs are included in the spread Commission paid on all trades
24-hour dealing on key markets Deal during exchange opening hours
No shareholder privileges Gain shareholder rights, such as voting privileges

Comparison of a spread bet and share deal

Buying Barclays

Spread bet Share deal
Underlying price 208 208
Our price 207.4 / 208.6 207.9p / 208.1p
Deal Buy at 208.6 Buy at 208.1p
Deal size £20 per point 2000 shares
Initial outlay

£834

(Margin = exposure x 20% margin factor)

£4,170

(2000 shares at 208.1p)
Close price Sell at 228.5 Sell at 228.9p
Costs No commission (cost is factored into the spread)
Spread betting charges and fees.
£16 commission (can be lower, depending on trading volume)
Share dealing charges and fees.
Stamp duty None £21
Capital gains tax (CGT) None Yes, depending on individual circumstances.
Profit

(228.5 - 208.6) x £20 =
£398 (tax free)*

([228.9 - 208.1] x 2000) - £16 - £21 =
£379 (before capital gains tax)*

Note: some values have been rounded to the nearest pound.

Discover how to spread bet and get more example trades.

Differences between spread betting and share dealing in detail

Spread betting Share dealing
What is it? The placing of a bet that enables you to speculate on a range of outcomes. The buying and selling of physical shares in a company.
Are there expiries? Yes, fixed expiry dates. No expiry dates.
Do I pay tax? There’s no capital gains tax or stamp duty.* 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 or SIPP.
When can I trade? We offer 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. Only when the related exchange is open.
Do I pay to keep
positions open?
Overnight funding on daily funded bets. Rollovers on forwards and futures. No.
What kind of trading
is it suitable for?
Intra-day
Daily
Long-term
Investing
Can I receive dividends? No. We make a dividend adjustment on equity and stock index spread bets, so there is no material impact on you. Yes.
Can it be used for
hedging?
Yes. Rarely, as spread bets and CFDs are more effective.
Range of markets More than 16,000 markets, including:

Forex
Stock indices
Shares
ETFs and ETCs
Metals
Energies
Spot metals
Soft commodities
Options
Sprint bets
Interest rates
Bonds
Sectors
Share forwards
Forex forwards
Daily stock index futures
Stock index forwards
Daily oil futures
Shares and ETFs only, but more than 12,000 from a range of stock indices in local denominations:

UK indices including:
FTSE 100
FTSE 250
Other small cap UK stocks

US indices including:
S&P 500
NASDAQ 100
Other small cap US stocks

European indices including:
DAX
HDAX
MDAX
Irish ISEQ
Dutch AEX
The charges A spread on all markets.
No commission
Overnght funding charge
(excluding futures and forwards).
Commission on all trades.
A currency conversion fee on international shares.
Dealing platforms Web trading platform
Mobile app (iPhone, Android)
Tablet app (iPad)
MetaTrader 4
ProRealTime
Web trading platform
Mobile app (iPhone, Android)
Tablet app (iPad)
L2 dealer (DMA)
Direct market access
(DMA)
No. Yes.

FAQs

Is spread betting cheaper than share dealing?

Spread betting requires less capital upfront than share dealing because it is a leveraged product. If you invest in a share, you will have to pay the full cost of the asset upfront. But when you spread bet, you would only be required to put up a fraction of the initial cost, known as a margin. This means that you can get the same market exposure for less money. For this reason, leverage magnifies both profits and losses.

It is also important to consider any costs and charges that your positions may be subjected to. When you spread bet, you don’t pay commission as all the costs of trading are included in the spread, but you may be charged for overnight funding. When you invest in shares, you would need to pay commission along with a custody fee, any other charges and tax.

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.*

Alternatively, if you decide to deal shares, you would pay stamp duty on each investment and capital gains tax on any profits. The exception is investments made via a tax-free stocks and shares ISA or SIPP.*

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 straight away when you close your spread bet, which 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 an equity 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/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.

Develop your spread betting knowledge with IG

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

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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.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% 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.