Futures, CFDs and spread bets are high risk; most retail traders lose money. Education only, not advice. Risk warning

Good Trading Guide

Futures vs Spread Betting vs CFDs vs Share Dealing

Module 2: Brokers, Accounts and Platforms (UK) · Lesson 3 of 11 · Back to course

In the UK you can get exposure to the same market – say, the FTSE 100 – in several different ways. The four you’ll hear about most are spread betting, CFDs, futures and plain share dealing. They can all go up and down with the same prices, but they work differently, cost different amounts and are taxed differently. This lesson compares them side by side.

Our order on this site: we start with futures, then spread bets, and cover CFDs last. Futures trade on a central exchange with fixed contract sizes, which makes them easier to understand and size. CFDs combine leverage, provider pricing and overnight financing, which makes them the hardest to get right as a beginner. All of them are high risk.

The four products in one sentence each

  • Spread betting: you bet a chosen amount in £ per point on a market rising or falling, with a provider. You never own anything.
  • CFD (contract for difference): you agree with a provider to exchange the difference in a market’s price between opening and closing, in contracts or units. You never own anything.
  • Futures: standardised contracts to buy or sell something at a set price on a future date, traded on an exchange. Most traders close them before they expire.
  • Share dealing: you buy and own actual shares (or funds) through a stockbroker or investment platform, usually without leverage.

Side by side

Spread betting CFDs Futures Share dealing
Do you own the asset? No No No (a contract on an exchange) Yes
How you size a trade £ per point Contracts / units / lots Number of exchange contracts Number of shares or £ amount
Leverage? Yes (UK retail limits apply) Yes (UK retail limits apply) Yes (set by exchange margins) Usually no
Can you go short easily? Yes Yes Yes Not usually
Where is it traded? With your provider With your provider On an exchange On an exchange, via a broker
Negative balance protection (retail)? Yes Yes Not under the same rule – check your broker Not needed without leverage
Main costs Spread, overnight financing Spread and/or commission, overnight financing Commission, exchange fees Dealing fees, platform fees, stamp duty on most UK shares
Headline UK tax Normally no CGT or Income Tax Capital Gains Tax; losses can be offset Usually Capital Gains Tax CGT (unless in an ISA)

Spread betting in more detail

You choose a stake, say £2 per point. If you buy the UK 100 at 8,000 and it rises to 8,030, you make 30 × £2 = £60. If it falls to 7,970, you lose £60.

  • Why UK traders use it: sizing in pounds is simple, and for most people profits are normally free of Capital Gains Tax and Income Tax because HMRC treats it as betting. There’s also no stamp duty.
  • The catch: because profits are normally outside tax, losses get no tax relief either. And there are exceptions – for example, if spread betting is your trade or it’s used for commercial hedging. See our UK tax guide.

CFDs in more detail

With a CFD you might buy 2 contracts of the UK 100, where each contract is worth £1 per point. Economically that’s very similar to a £2-per-point spread bet. The differences are mostly about how it’s priced and taxed:

  • Some CFDs charge a commission with a tighter spread (common on share CFDs).
  • Gains are subject to Capital Gains Tax above the annual allowance (£3,000 in 2026/27), but losses are allowable – you can offset them against other gains.
  • Many international traders and most platforms worldwide use CFDs, so you’ll meet them on MetaTrader and similar platforms.

Futures in more detail

New to futures? Start with 1F.1 What are futures? and 1F.4 Futures margin. Remember: negative balance protection covers spread bets and CFDs, not futures – with a real futures account you can lose more than you deposit.

Futures trade on exchanges such as ICE (which lists FTSE 100 futures) or CME in the US. Every contract has a fixed size and expiry date set by the exchange. Prices are public and centrally cleared, so there’s no single provider setting your quote.

  • Pros: transparent exchange prices; costs are mostly commissions and exchange fees.
  • Cons: contract sizes can be large for small accounts (although some exchanges offer smaller “micro” contracts); fewer UK brokers offer them to beginners; contracts expire and need rolling over. The FCA’s retail CFD rules – such as negative balance protection – don’t apply in the same way, so losses can exceed your deposit. Check carefully with any provider.

Share dealing in more detail

Buying shares means you own part of a company. There’s normally no leverage, so you can’t lose more than you put in, and you can hold for years without overnight financing.

  • You may receive dividends.
  • Stamp duty (or SDRT) of 0.5% is usually charged when you buy shares in most UK companies.
  • You can hold shares inside a Stocks and Shares ISA, where gains and dividends are tax-free. You can’t hold spread bets or CFDs in an ISA.
  • It’s usually seen as investing rather than trading – a different activity with different risks.

Example: one idea, four ways (illustrative numbers)

All figures are made up for teaching purposes. They aren’t real prices, costs or a trade idea.

You expect the FTSE 100 to rise from 8,000 to 8,080 over a week, and you’re prepared to lose £50 if it falls to 7,975 (25 points).

  • Spread bet: £50 ÷ 25 = £2 per point. If right: 80 × £2 = +£160, normally tax-free. Margin at 5%: about £800.
  • CFD: 2 contracts at £1 per point. If right: +£160 before any commission. Gains go into your CGT calculation; a loss would be allowable.
  • Futures: a standard FTSE 100 futures contract is far bigger than £2 per point, so the same £50 risk isn’t possible with one contract – this is a common reason beginners don’t start with futures.
  • Shares (e.g. a FTSE 100 tracker fund): to make £160 from a 1% rise, you’d need to invest about £16,000 of your own money – no leverage, and no stop is needed to protect against losing more than you deposit.

Same idea, very different amounts of money tied up and very different tax outcomes.

Common mistakes

  • Choosing spread betting just because it’s “tax-free”. Most spread betting accounts still lose money, and losses get no tax relief.
  • Forgetting overnight financing. Holding a spread bet or CFD for weeks can cost more than you expect.
  • Assuming all leveraged products have the same protections. Retail CFD and spread bet rules don’t automatically apply to futures.
  • Mixing up trading and investing. Owning a tracker fund in an ISA for 20 years is a completely different activity from day trading a spread bet.

The prop firm angle

Most forex prop challenges run on simulated CFD-style accounts in lots, often on platforms such as MetaTrader or cTrader. Futures prop firms use simulated futures contracts. If you’ve only practised in £ per point, spend time on a demo learning to size in lots or contracts before any challenge – size errors are a common way to fail on day one. Prop payouts have their own tax questions, which are separate from spread betting (see our UK tax guide).

Key takeaways

  • Spread bets and CFDs are leveraged bets on price with a provider; you never own the asset.
  • Futures are standardised exchange contracts; shares mean owning part of a company.
  • Spread betting profits are normally free of CGT for most people, but losses get no relief; CFD gains are subject to CGT, and losses can be offset.
  • Choose based on how the product works and what you can afford to lose – not on tax alone.

Quick quiz

  1. In which product do you actually own the asset? (Share dealing.)
  2. A £3-per-point spread bet rises 40 points. What’s the profit? (£120.)
  3. What’s the main tax difference between spread betting and CFDs for most people? (Spread betting profits normally aren’t subject to CGT; CFD gains are, but CFD losses can be offset.)
  4. Can you hold CFDs in a Stocks and Shares ISA? (No.)
  5. Why are futures often harder for small accounts? (Contract sizes are fixed and can be large.)

Key terms

Spread betting · CFD · Futures · Stake per point · Capital Gains Tax · Stamp duty · ISA · Overnight financing · Leverage

Try this

On a demo account that offers both spread bets and CFDs, open the same tiny trade on the UK 100 both ways: £1 per point as a spread bet and the equivalent CFD size. Compare the order tickets: the size field, the margin shown, the spread and any commission. Close both after an hour and compare the results. Note which one you found easier to size correctly.

FAQ

Is spread betting gambling? HMRC treats it as betting for tax purposes, but it’s regulated by the FCA as a financial product, not by the Gambling Commission. It’s just as risky as CFDs.

Which is better for beginners, spread betting or CFDs? We don’t make personal recommendations. Many UK beginners find £-per-point sizing easier to understand. The right choice depends on your circumstances – including tax – so consider speaking to an accountant if you’re unsure.

Do I need to declare spread betting profits? For most people, no – but there are exceptions. Read our UK tax guide and take professional advice if trading is a big part of your income.

← 2.2 How to check a firm is FCA authorised
2.4 Client money, FSCS protection and negative balance protection →

Disclaimer: This page is general education, not financial, investment or tax advice or a personal recommendation, and it doesn’t take your circumstances into account. Examples are hypothetical, for illustration only, and not an invitation to buy or sell. Learning a strategy doesn’t guarantee profits. Past performance is not a reliable guide to future results. Futures, spread bets and CFDs are complex and carry a high risk of losing money quickly because of leverage, and most retail traders lose money. With a real futures account, losses can exceed your deposit. Only trade with money you can afford to lose, and speak to an independent FCA-authorised adviser if you’re unsure. Tax treatment depends on your individual circumstances and may change. Read our full risk warning.