Spread Betting Explained: How It Works in the UK

What is Spread Betting?

Spread betting is a way to trade financial markets without owning the underlying asset. You bet on whether a price will go up or down. The more it moves in your direction, the more you make.

Why is it Tax-Free?

In the UK, spread betting profits are exempt from Capital Gains Tax and Stamp Duty. This is because HMRC classifies it as gambling, not investing. This makes it uniquely attractive for UK traders.

How It Works

A broker quotes a spread — say FTSE 100 at 7500-7502. You either Buy (go long) at 7502 or Sell (go short) at 7500. You choose your stake per point (e.g. £1/point). If the FTSE rises 50 points and you bought, you make £50. If it falls 50 points, you lose £50.

Risks

Leverage: Spread betting uses leverage. A 10% margin means £1,000 controls £10,000 of exposure. This amplifies both profits AND losses.
You can lose more than your deposit without proper risk management.
Always use stop-loss orders. Never risk more than 1-2% of your account on a single trade.