UK traders get two structurally similar leveraged products with one enormous difference: spread betting profits are currently free of capital gains tax, while CFD profits are taxable. That single fact drives most of the decision.
Same Trade, Different Wrapper
Both let you go long or short on thousands of markets with leverage, without owning the underlying. A spread bet stakes £X per point of movement with a defined expiry (usually rolled automatically); a CFD trades contracts sized in units. Pricing, margin requirements, and platform experience at firms offering both (IG, City Index, CMC) are near-identical.
The Tax Divide
Spread betting is classed as gambling in the UK: no capital gains tax, no stamp duty, and losses not deductible. CFD gains are CGT-liable — but losses offset other gains, which matters for anyone also holding investments. Profitable traders generally prefer the spread-bet wrapper; those managing gains and losses across a portfolio sometimes prefer CFDs' loss relief. (Tax treatment can change; confirm current rules.)
Costs and Practicalities
Spread-bet costs hide entirely in the spread, slightly wider than CFD spreads at some firms once commissions are included — compare all-in on your specific markets. CFDs are the only option outside the UK/Ireland, and the natural choice for corporate accounts. Both carry identical leverage risk: the wrapper changes the tax, never the drawdown.
Frequently Asked Questions
Why would anyone choose CFDs in the UK?
Loss relief against capital gains, corporate account structures, and hedging portfolios — situations where the tax symmetry of CFDs beats tax-free-but-no-relief.
Is spread betting really tax-free?
For recreational traders under current UK rules, yes. HMRC can treat trading as a taxable trade in edge cases (e.g. it's your organized profession) — high earners should take advice.