A British peculiarity
Spread betting is legally a bet, not an investment. You stake an amount per point of movement in a price: £10 a point on an index at 7,500, and if it goes to 7,550 you make £500.
Because it is classified as gambling, profits are free of capital gains tax and stamp duty for UK residents under current rules. That is the entire reason the product exists in this form, and it is available essentially nowhere else.
The trade-off nobody mentions in the adverts
If gains are not taxable, losses are not deductible. You cannot offset spread betting losses against other capital gains, which you can with shares or CFDs. Given that most accounts lose money, the tax treatment is a benefit to a minority and a disadvantage to the majority.
HMRC's position also depends on it not being your trade or profession. The treatment is not a guarantee and it is not the same for everyone.
Mechanically identical to a CFD
The spread, the leverage, the overnight financing, the margin close-out and the counterparty structure all work the same way. The same FCA protections apply: leverage caps, negative balance protection, mandatory loss disclosures. The published percentages of losing retail accounts sit in the same 65–80% range.
The firms are often the same firms, offering both products side by side and letting the client pick the tax wrapper.
Where it is genuinely useful
For short-term hedging of a portfolio, or for taking a position on something a UK investor cannot easily access directly, it is a legitimate tool with a clean tax outcome. As a way to invest, it competes against an ISA, which is also tax-free, does not decay and does not carry leverage.
How you would actually trade it
Use an FCA-authorised firm and check the register. Understand that your stake per point defines your exposure — £10 per point on an index at 7,500 is £75,000 of notional exposure, not a £10 risk.
Guaranteed stop-losses are available from most firms for an additional premium and are the only reliable protection against gap risk. Ordinary stops are not guaranteed and can fill well beyond your level in a fast market.
What goes wrong
- The majority of accounts lose money, per required disclosures.
- Losses are not tax-deductible, which matters more than the gains being tax-free for most users.
- Leverage and gap risk, mitigated but not eliminated by close-out rules and negative balance protection.
- Financing charges on positions held overnight.
- Tax treatment can change, and depends on personal circumstances.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.