Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.6% 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.

Beginner

CFD explainer: Understand spread betting

Spread betting is a potential tax-free way for residents in the UK and Ireland to trade a view on rising and falling markets. Just like CFDs, spread bets can be used without having to own the underlying asset and eligible clients can spread bet on different instruments such as Indices, Commodities, FX and more, along with the flexibility of leverage.

While the trader can trade Spread Bets in the British Pound (GBP) and Euro (EUR), removing exchange rate risk, the key difference between spread betting and CFDs is in how each is treated for taxation. Spread betting is free from CGT while trading CFDs requires you to pay CGT. Spread Betting is also only available in the UK and Ireland, while CFDs are available in the vast majority of countries and are subject to taxation.

Let’s take a look at how this works

Here are some advantages to Spread Betting

  1. Trade both rising and falling markets – trade the possibilities with Pepperstone either long or short.
  2. Access leverage – you can use a relatively small deposit to control a larger value trade
  3. Huge range of markets – stock markets, indices, currencies and commodities can all be traded as spread bets and you have access up to 24 hours a day
  4. Commission-free – there are no separate commission charges involved.
  5. Open positions in British Pound (GBP) on all markets limiting your potential currency risk exposure. This is different from CFDs which are traded in a set currency , and
  6. Tax advantages. The profits are tax free for residents of the UK and Ireland. As an added bonus, you don’t pay stamp duty either as you never own the underlying asset.

Who might Spread Betting appeal to?

Well perhaps you have a keen interest in UK and global markets, as well as a portfolio of longer term investments. You might want to periodically change the balance of stocks but not actively trade this investment. In this scenario, Spread betting could complement and work alongside your investment portfolio allowing you to take more active trading decisions by going long and short, on stocks, UK100, crude and British Pound (GBP) allowing you to express your view with leverage. It could even allow you to hedge drawdown in the investment portfolio by shorting stocks against your direct shareholding.

Visit our website for more information on making the right choice for your circumstance.

Please note in the UK and Ireland, spread betting profits are exempt from capital gains tax. Please be aware that tax treatment depends on your individual circumstances and tax law may be subject to change.*

Learn more about trading CFDS

Here at Pepperstone, our customers love the product range along with the low cost to trade and the fact so many markets are open around the clock. Interested? Watch the more videos to learn or speak to our team about whether CFDs are right for you.