Spread betting or CFDs? A UK trader's guide with Pepperstone
UK · HEAD TO HEAD
- Pounds per point.
- Usually free of CGT and stamp duty.
- Contracts or lots.
- Gains taxable, losses can offset.
Spread betting and CFDs can give you exactly the same exposure to a market. What differs is how you size the trade, how it is taxed and what it costs. Pepperstone UK offers both from one login, so the choice is yours. This guide puts them side by side, with numbers, so you can decide with confidence.
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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.6% 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. In the UK, 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.
01 The choice in one minute
Pepperstone UK lets you open a spread betting account, a CFD account or both, on the same markets and the same platforms. Note that for CFDs, only the Razor account is available on MT4 and TradingView. Spread betting works on all five platforms. CFD Standard accounts are available on MT5, cTrader and the Pepperstone platform, and CFD Razor accounts on all five. That flexibility is useful, but you still need to pick the right wrapper for each trade. In most cases the decision comes down to three questions:
- Do you prefer to think in pounds per point or in contracts and lots?
- Do you want profits to be free of capital gains tax, or do you want to be able to offset losses?
- Do you trade frequently enough for commission-based pricing to matter?
| Feature | Spread betting | CFDs |
|---|---|---|
| How you size a trade | £ per point | Contracts or lots |
| Usual UK tax on gains | Exempt from CGT | Subject to CGT |
| Can losses offset gains? | No | Usually yes |
| Stamp duty | None | None |
| Commission | None, cost is in the spread | None on Standard, from £2.25 per lot per side on Razor |
| Overnight funding | Yes | Yes |
| Hedging a share portfolio | Possible | Common use |
| Platforms at Pepperstone | All five | Razor: all five. Standard: MT5, cTrader and the Pepperstone platform |
02 How spread betting works
With a spread bet you choose how many pounds you want to make or lose for every point the market moves.
The UK 100 is quoted at 8,200. You think it will rise and buy at £5 per point.
- It rises to 8,260, a move of 60 points.
- Profit: 60 x £5 = £300, before funding and other costs.
- If it falls 60 points instead, you lose £300.
- The ticket tells you your exposure in pounds before you place the trade, which many UK traders find intuitive.
The margin you need depends on the market and FCA retail leverage limits, for example 5% for major indices, which means 1:20 leverage.
03 How CFDs work
With a CFD you choose a number of contracts or lots. The contract specification tells you how much one point is worth for that instrument.
You buy 5 contracts of the UK 100 CFD, where one contract is worth £1 per point.
- The same 60 point rise gives 60 x 5 x £1 = £300, before costs.
- The result matches the spread bet. The difference is how it is taxed and how commission is charged.
04 Using a CFD to hedge a share portfolio
One practical reason UK investors choose CFDs is hedging. If you hold UK shares in a general investment account and expect a short-term fall, you can sell an index CFD to offset part of the drop without selling the shares themselves.
You hold £40,000 of large UK shares that broadly track the UK 100, which is at 8,000.
- You sell 5 UK 100 CFD contracts at £1 per point, which gives exposure of 5 x 8,000 = £40,000.
- The index falls 4% to 7,680. Your shares lose roughly £1,600.
- The short CFD gains 320 points x £5 = £1,600, before costs.
- If the market rises instead, the CFD loses what the shares gain. A hedge reduces risk in both directions.
Because CFD losses can usually be offset for CGT, a losing hedge can still have a tax use, which is not the case with a spread bet. A hedge is never exact. Your shares will not track the index perfectly, and funding costs build while the hedge stays open.
05 Tax: the biggest difference
Spread betting
For UK residents, spread betting profits are generally exempt from capital gains tax, and spread bets do not attract stamp duty. The other side of that is that losses cannot be used to reduce a CGT bill.
CFDs
CFD profits may be subject to capital gains tax. Losses can usually be offset against other capital gains, including gains from shares or property.
Trader A makes £8,000 profit from trading and has no other gains.
- As a spread bettor, the £8,000 is generally CGT free.
- As a CFD trader, gains above the annual exempt amount (£3,000 for 2026/27) may be taxable.
- Trader B loses £4,000 trading but has £10,000 of gains from selling shares.
- As a CFD trader, the £4,000 loss can usually reduce the taxable gain to £6,000. As a spread bettor, it cannot.
- Mostly expect to speculate and want a simple, tax-efficient setup: spread betting is the natural fit.
- Already have gains elsewhere, or want to hedge a share portfolio: a CFD account can make more sense.
- Many traders use both, choosing per trade.
06 Costs side by side
- Spread betting: no commission. You pay the spread, plus overnight funding on positions held past the cutoff. Pepperstone UK advertises spot gold spread bets from 0.1 points.
- CFD Standard: no commission, except on shares, starting at just 0.1% per side on UK and European share CFDs, wider spreads.
- CFD Razor: raw spreads from 0.0 pips on FX and 0.08 on spot gold, plus commission from £2.25 per lot per side.
Spread of 0.1 pip on one lot: about £0.75.
- Commission: £2.25 in and £2.25 out, so £4.50.
- Total round trip: about £5.25.
- A frequent FX trader may find this cheaper than a wider spread. An occasional trader may prefer the simplicity of a spread bet.
07 Which markets you can trade
Pepperstone UK offers spread bets and CFDs across forex, indices, commodities such as gold and oil, shares and ETFs, so in most cases you can express the same view either way. A few details differ between the two account types, such as the minimum stake on a spread bet versus the minimum lot on a CFD, and the way some markets are quoted. Check the product schedule for the specific market before you assume the two tickets are identical.
08 Opening both accounts at Pepperstone
09 Retail protections in the UK
As a retail client with Pepperstone Limited, which is regulated by the FCA, you get:
- Leverage limits: for example 1:30 on major FX, 1:20 on major indices and gold, 1:5 on shares.
- Margin close-out: positions are closed when your account falls to 50% of required margin.
- Negative balance protection for retail clients: retail accounts are reset to zero as soon as possible if losses exceed your balance, so you cannot owe more than you deposited.
Pepperstone reports a 99.32% fill rate with no dealer intervention for the first quarter of 2026. Stops are not guaranteed and can be filled at a worse price in fast markets.
10 Common mistakes
- Comparing stakes, not exposure. £5 per point and 5 contracts are only equal if each contract is worth £1 per point.
- Assuming spread betting is always tax free. HMRC can treat it differently if trading is your main source of income.
- Ignoring funding. Both products charge overnight funding, which adds up on longer holds.
- Using professional status to get higher leverage without weighing the trade-offs. You lose FCA retail protections, including negative balance protection.
11 FAQ
What is the difference between spread betting and CFDs?
Spread bets are sized in pounds per point and are usually free of CGT. CFDs are sized in contracts or lots, profits may be taxable and losses can usually be offset.
Is spread betting tax free in the UK?
Spread betting profits are generally exempt from CGT and stamp duty for UK residents. Tax treatment depends on your circumstances and can change.
Can I offset spread betting losses against tax?
No. Spread betting losses generally cannot be used to reduce capital gains tax. CFD losses usually can. Tax treatment depends on your circumstances and can change.
Is spread betting or CFD trading cheaper?
It depends on how you trade. Spread bets have no commission. Razor CFDs have tighter spreads plus commission, which can suit frequent traders.
Can I have a spread betting and a CFD account with Pepperstone?
Yes, both under one login.
Which platforms support spread betting at Pepperstone?
TradingView, MT5, MT4, cTrader and the Pepperstone platform.
What leverage can UK retail traders use?
Up to 1:30 on major FX, 1:20 on major indices and gold and 1:5 on shares under FCA rules.
Can I try both first?
Yes. Pepperstone offers free demo accounts.
12 Our take
Pepperstone makes this decision easy to test: one login, both wrappers, the same platforms and tight pricing on each. Spread betting suits straightforward speculation in pounds with a simple tax position. CFDs suit traders who want to offset losses, hedge or think in lots. Whichever you choose, keep position sizes modest compared with your account.
About this article: this article was produced in partnership with Pepperstone, which paid MatchMyBroker for it. MatchMyBroker may also earn a commission if you open an account through links on this page. Pepperstone reviewed the article for factual accuracy, and the opinions are our own. This is general information, not personal financial advice. Facts were checked against Pepperstone's official pages in October 2026 and can change.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.6% 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.
