Spread Betting on Global Markets

Frequently Asked Questions

• 1

  Is spread betting legal in the UK?

  Spread betting, while regulated by the Financial Conduct Authority (FCA), is a leveraged product that involves substantial risk to your capital due to the possibility of rapid price fluctuations against your position. It is important to be aware that losses can exceed your initial investment, potentially leading to the requirement of additional payments. Given that these products might not be appropriate for everyone, it is essential to fully comprehend the associated risks and, if necessary, obtain independent advice.
• 2

  How does spread betting work?

  Spread betting involves speculating on the price movement of financial instruments, such as stocks or commodities, without actually owning them. You bet on whether the price will rise or fall, and your profit or loss is determined by the extent of the price movement. The amount you wager per point of price movement is known as the 'spread'. However, because spread betting is leveraged, even small price movements can result in significant profits or losses relative to your initial capital. This leverage will potentially amplify both gains and risks, making it important for traders to manage your speculative trade carefully to avoid substantial losses.
• 3

  What is the difference between spread betting and cfd trading?

  Spread betting and CFD (Contract for Difference) trading both allow speculation on the price movements of financial assets, but they have key differences. Spread betting is a tax-free method in many jurisdictions, where traders bet a certain amount per point of price movement, and profits or losses are based on the degree of movement. CFD trading, meanwhile, involves trading the difference in price of an asset between the opening and closing of the contract, subject to capital gains tax, and allows both long and short positions with the use of leverage.
• 4

  Is spread betting taxable?

  Spread betting is a type of derivatives trading where traders predict the future direction of market prices. In spread betting, you don't actually own the underlying assets you are speculating on; rather, you bet on the price movements (up or down) of various financial products. In certain tax jurisdictions, spread betting is categorised as gambling, and as a result, any potential earnings made may be subject to taxation as gambling winnings, not as capital gains or income. It is advisable for spread bettors to maintain detailed records and consult a tax professional for guidance when filing their taxes.