What is the difference between spread betting and CFD trading?
Verdict
- Pepperstone offers both, so you don't have to pick a provider to pick a product. A spread bet is a stake in pounds per point of movement, while a CFD is a contract for a number of units of the market.
- Tax is the main UK difference. Pepperstone says spread-betting profits are exempt from capital gains tax, while CFD profits are subject to CGT and CFD losses can be offset against gains.
- At Pepperstone, spread bets carry no commission. CFDs come either with commission (Razor, from £2.25 per lot per side) or without it (Standard).
- FCA leverage caps apply to both products: for retail clients, 1:30 on major FX and 1:20 on major indices and gold.
Both products let you trade the price of a market with leverage, without owning it. The differences are in how you size a trade, how gains are taxed in the UK and how the provider charges you. Pepperstone runs both through the same FCA-regulated company, so its terms show the contrast clearly.
The short answer, and where Pepperstone fits
With a spread bet you pick a stake, say £2 a point, and gain or lose £2 for every point the market moves. With a CFD you buy or sell a number of contracts or lots, and your profit or loss is the price change multiplied by that size, in the market's currency. Pepperstone Limited (FCA 684312) lets you hold a spread-betting account and its Standard and Razor CFD accounts at the same time. That's useful if some of your trading fits one product and some fits the other.
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Spread betting and CFDs compared on Pepperstone's UK terms
| Spread bet | CFD | |
|---|---|---|
| How you size a trade | £ per point | Contracts or lots |
| UK tax, per Pepperstone | No CGT, no stamp duty | CGT applies, losses can be offset, no stamp duty |
| Commission | None | Razor from £2.25 per lot per side; Standard none except shares |
| EUR/USD minimum spread | 0.5 | Razor 0.0 (plus commission); Standard 1 |
| Markets (March 2025 count) | 1,432 | 1,444 |
| Platforms | Web and app, MT4, MT5, cTrader, TradingView | Web and app, MT5, cTrader on both; MT4 and TradingView on Razor only |
The same trade placed both ways
Say you think the UK100 will rise. As a spread bet you buy at £2 a point. If the index gains 40 points you make £80, and if it falls 40 points you lose £80. A CFD with the same exposure moves by the same amount, so the result before costs is identical. The difference shows up afterwards. Pepperstone says the spread-bet gain falls outside capital gains tax. The CFD gain counts towards CGT, but if the trade had lost, that loss could be set against other gains. The quoted price is close too: Pepperstone's published UK100 minimum spread is 1 point on both the spread bet and the Razor CFD.
Is spread betting or CFD trading better for a UK trader?
It depends on your tax position and your tools more than on the markets you trade.
- Spread betting tends to suit UK taxpayers who expect gains, and traders who like sizing in pounds per point on any of Pepperstone's five platforms.
- CFDs tend to suit traders who expect some losing years and want to offset losses for CGT. They also suit FX traders who want Razor's raw pricing, averaging 0.1 pips on EUR/USD before commission.
- Leverage caps, negative balance protection and the 10pm UK overnight-fee cut-off don't change your choice. They are the same for both products.
- Tax depends on your own circumstances and the rules can change. If the amounts matter, check HMRC guidance or speak to a tax adviser before choosing.
Sources
Can I spread bet if I don't live in the UK?
Pepperstone offers spread betting to UK residents. If you live elsewhere, you would normally trade CFDs through the Pepperstone company that serves your country.
Do spread bets and CFDs have the same leverage limits?
Yes, for retail clients. Pepperstone's UK caps are 1:30 on major FX, 1:20 on major indices and gold, 1:10 on other commodities and 1:5 on shares.
Which is cheaper on EUR/USD at Pepperstone?
On minimums, a Razor CFD starts at 0.0 pips plus commission, a spread bet at 0.5 with no commission, and a Standard CFD at 1 pip. Which works out cheaper depends on your trade size and the live spread.
Spread bets and CFDs are complex, leveraged instruments with a high risk of losing money rapidly. With Pepperstone Limited, 73.6% of retail investor accounts lose money on these products. Tax rules depend on your circumstances and may change. This article is general information, not tax or investment advice.