Spread Betting UK – Spread Betting Explained

Spread betting is a form of financial trading that comes with a major stand-out benefit – all profits are exempt from capital gains and stamp duty tax. In addition to this, the best spread betting brokers offer thousands of financial markets, leverage, low fees, and even the ability to short-sell.

In this guide, we explain the ins and outs of how spread betting in the UK works and which brokers are worth considering in 2021.

Best Spread Betting Brokers UK List

In order to get your spread betting UK journey off to a flying start – you’ll need a good broker by your side. Below you will find a list of the best spread betting brokers in the UK for 2021.

  • Capital.com – Overall Best Spread Betting Broker UK
  • AvaTrade – Best Spread Betting Broker UK for MT4
  • Pepperstone – Best Spread Betting Broker UK for Low Fees

We review the above spread betting UK brokers further down in this guide.

Spread Betting UK Walkthrough – A Quick Guide For 2021

If you’re completely new to spread betting in the UK – below you will find a quickfire guide on how this form of financial trading works.

  • Step 1: Open an Account with Capital.comCapital.com is the best spread betting broker in the UK as the platform offers thousands of markets at 0% commission. You can open an account in just two minutes by entering your personal information.
  • Step 2: Upload Your ID – To remove all account limits, quickly upload a copy of your passport or driver’s license.
  • Step 3: Deposit Funds – You can deposit from just £20 at Capital.com when using a debit/credit card or e-wallet.
  • Step 4: Choose Market – You can now search for the financial instrument that you wish to trade. Capital.com covers everything from stocks and forex to commodities and indices.
  • Step 5: Place Spread Betting Order – If you think the asset will rise in value – place a buy order. If you think it will fall in value – place a sell order. Enter your stake per point and confirm the position.

And that’s it – you’ve just placed your first spread betting UK trade at Capital.com!

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.25% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider.

 

What is Spread Betting?

In a nutshell, spread betting is a form of financial trading that allows you to speculate on the future value of an asset. For example, if AstraZeneca shares are trading at £8.20 on the London Stock Exchange – you need to decide whether you think the price will rise or fall. If you predict the future price of the shares correctly – you will make a profit.

In this sense, spread betting is very similar to CFD trading. After all, when you place a spread betting order – you do not own the underlying asset. Instead, you are merely looking to predict whether the asset will increase or decrease in value. One of the major benefits of choosing a spread betting UK platform is that all profits are exempt from tax. Spread betting is mainly a UK activity, however there are a number of free betting apps in the USA which offer options betting.

spread betting uk

This includes both capital gains and stamp duty tax – so you get to keep all profits for yourself. In addition to this, many spread betting platforms in the UK offer thousands of markets – which ranges from UK and international stocks, ETFs, forex, precious metals (e.g. gold), oil, indices, and more.

Plus, you can also trade with leverage – which allows you to amplify the size of your stake. Furthermore, and as we cover later in our spread betting UK broker reviews – the best platforms in this space allow you to trade on a 0% commission basis. All in all, if you’re looking to speculate on the financial markets – spread betting is well worth considering.

Spread Betting Explained

So now that we have covered the basics of how spread betting in the UK works – we can now walk you through a more detailed explanation.

Spread Betting UK Markets

First and foremost, let’s have a quick look at the many spread betting UK markets that you will likely have access to when signing up with a top-rated broker.

  • Stocks – UK and international shares
  • ETFs – Popular ETFs backed by the likes of Vanguard, iShares, and SPDR
  • Indices – S&P 500, FTSE 100, Dow Jones, etc.
  • Forex – Trade dozens of currency pairs like GBP/USD and EUR/USD
  • Precious Metals – Gold, silver, platinum, etc.
  • Energies – Brent crude oil, WTI oil, natural gas, etc.
  • Agricultural Products – Sugar, wheat, corn, coffee, etc.

As you can see from the above list, the best spread betting UK sites give you access to a wide range of financial markets. As such, you’ll never be short of trading opportunities.

Buy and Sell Orders

Once you have decided which financial instrument that you wish to spread bet, you then need to decide whether you think the price of the asset will rise or fall. This is another major benefit of choosing a spread betting UK platform as opposed to a traditional brokerage firm – as you always have the option of going long or short on your chosen market.

Here’s what you need to know about buy and sell orders:

  • If you believe that the asset will increase in value – place a buy order
  • If you believe that the asset will decrease in value – place a sell order

If you place a buy order and the price of asset rises – then you will make a profit by closing the position with a sell order. And similarly – if you place a sell order and the asset falls in value, you can lock in your profits by closing the position with a buy order.

Point Movements

So far – the basics of spread betting UK might appear somewhat simple. However, we now need to move on to the point movement system that is utilized by spread betting brokers – which might be unfamiliar territory for you.

In a nutshell, when you buy traditional shares in the UK – the price of the respective stock moves in pence. For example, if you buy Cineworld shares at 82.01p and sell them at 85.05p – that’s a profit of 3.04p for each stock that you bought. However, in the case of spread betting UK – this price movement would be depicted in points. Furthermore, the point system operates in units – so 1p might amount to 100 points.

Let’s look at an example to help clear the mist:

  • You place a buy order on Cineworld shares at your chosen spread betting UK broker
  • When you place the order, you get a price of 82.01 points
  • When you close the position, Cineworld shares are priced at 85.05 points
  • To recap – 1p amounts to 100 points
  • As such, your profit on this trade is 304 points (85.05 – 82.01)

The amount of money that you made on the above trade would be dictated by the size of your stake per point – which we cover shortly. But first – it’s worth us giving you another quick example of how to spread betting point system works to ensure there is no ambiguity.

  • In this example, let’s say that you are looking to trade crude oil
  • The price of crude oil is currently at $70.50 per barrel
  • You think that this is overvalued – so you place a sell order
  • On this spread betting UK market – 1 cent amounts to 1 point – which makes it easier to calculate our potential profits
  • A few days later, crude oil has fallen to $66.80 per barrel
  • You place to buy order to close your position at a profit
  • On this spread betting UK trade, you made a profit of 370 points ($70.50-$66.80)

To clarify, although a sum of [$70.50-$66.80] gives us a figure of $3.70 – don’t forget that 1 point amounts to 1 cent. As such, $3.70 amounts to 370 points.

Stake Per Point

Once you get your head around the point movement system – understanding the spread betting UK arena is actually very simple. As such, we now move on to stakes. Put simply, when you speculate on your chosen financial instrument – you need to tell your broker how much you wish to stake per point movement.

tesla spread betting

Many spread betting brokers in the UK allow you to trade from just 10p per point – which is great if you are just starting out. In order to determine your profits or losses – your chosen stake is multiplied by the number of points that the asset moves by.

Let’s look at an example to help clear the mist:

  • Let’s say that you are trading Tesla shares – which are priced at $636.74 per stock
  • You think that the shares are undervalued – so you place a buy order
  • You decide to stake £1 per point on this trade
  • A few hours later, Tesla shares have risen to $639.74 per stock
  • This represents a price movement in your favor of 300 points
  • You staked £1 per point – so your total profit is £300

If, on the other hand, you staked just 10p per point on this trade – your profit would have amounted to £30 (300 points x 10p). Or, if you had staked £10 per point, your profit would have amounted to £3,000 (300 points x £10). As such can see, your profits are fully dictated by how much you decide to stake per point. This is also the case with losses – so it’s important to tread carefully if you are completely new to spread betting UK.

Market Duration

By this point in our spread betting UK guide – you should have a firm understanding of how to place orders. Next, we need to talk about the ‘duration’ of your chosen market. Put simply, when you’re spread betting a financial instrument – you do not own it. Instead, the spread betting market will track the price of the asset in real-time.

hsbc share price

For example, if HSBC shares are trading at 401.90p on the London Stock Exchange – the spread betting market will mirror this price. A direct consequence of this is that spread betting brokers always place a market duration on your trades. You often get two options in this respect – which we explain below:

  • Daily Funded Bet: This spread betting market will close at the end of the day
  • Quarterly Funded Bet: This spread betting market will close in three month’s time

Irrespective of which duration you opt for – if you have an open position when the market shuts – the broker will automatically close your outstanding trades. With that in mind, beginners will be best suited for a quarterly funded bet – as you will have more time to assess the market and make an informed decision. Daily funded bets, on the other hand, are more suited for experienced day traders.

Benefits of Spread Betting UK

So now that you have a firm understanding of how spread betting UK works – we can now talk about the many benefits that this form of financial trading offers.

Spread Betting UK Tax

As we briefly covered earlier, spread betting profits in the UK are completely exempt from taxation. Not only does this include stamp duty (0.5%) – but capital gains tax (10-20% depending on your tax band). This is in stark contrast to traditional investment vehicles in the UK – which attract both of the aforementioned tax liabilities.

For example:

  • Let’s say that you buy £5,000 worth of BT shares
  • As BT is listed on the London Stock Exchange – you need to pay a stamp duty tax of 0.5% on the purchase
  • This amounts to £25
  • Let’s then say that you sell your BT shares when they are worth £7,500
  • Your capital gains on this investment amount to £2,500. As such, you might need to pay capital gains tax on your profits.

At the other end of the spectrum, if you risked £5,000 on a BT share trade via a spread betting broker – you wouldn’t pay any stamp duty. Already, that’s saved you £25. If you then closed the position at a profit of £2,500 – you would get to keep it all for yourself – not least because spread betting is exempt from capital gains tax.

Rising and Falling Prices

When you purchase traditional shares – you are hoping that the markets are bullish – meaning that there are more buyers than sellers. In other words, the only way that you will make money from your traditional share investment is if the value of the stocks rises. This is where spread betting UK once again stands out – as the best brokers in this industry support buy and sell orders on all markets.

  • As we covered earlier, placing a sell order means that you think the asset will fall in value and a buy order means the opposite.
  • As a result, spread betting allows you to profit from both rising and falling markets.
  • This opens up the doors to more trading opportunities – especially if the markets are going through a bearish period.

For example, there would have been plenty of short-selling opportunities in early 2020 when the impact of the coronavirus pandemic crahsed the stock markets. Similarly, if you think that at over $70 per barrel of crude oil is overvalued – once again you can attempt to profit from this by placing a sell order at your chosen spread betting broker.

0% Commissions and Tight Spreads

Later in this guide on spread betting UK – we review three of the best platforms that are active in this space. All three brokers have one thing in common – they allow you to spread bet without paying any commission.

This means that in addition to 0% stamp duty and 0% capital gains tax – you’ll also be able to place buy and sell orders without paying a single penny in commissions or dealing fees. In addition to this, you’ll also benefit from super-low spreads.

  • For those unaware of this term, the spread refers to the gap between the buy and sell price of the asset in question.
  • For example, if you are trading the Royal Mail shares and the buy and sell price is 520 points and 519 points respectively – then the spread amounts to 1 point.
  • This means that when you enter the market, you need to make at least 1 point to cover the spread and thus – break even.

Crucially, because you are not buying the underlying asset – top-rated platforms like Capital.com offer some of the tightest spreads in the industry.

Access to Thousands of Markets

When you use a traditional online broker to trade – you will likely have access to a small number of markets. This might include a collection of UK shares and perhaps some ETFs and mutual funds. However, when you use a spread betting UK broker – expect to come across thousands of financial assets.

spread betting UK markets

As we covered earlier, this will include everything from shares, ETFs, and indices to forex, precious metals, and energies. This gives you ample opportunities to enter trades throughout the day.

For example, if tensions in the Middle East are on the rise, you might decide to place a buy order on crude oil – not least because global supply levels will likely fall. Or, if Turkey announces that its GDP fell by 2% in the prior quarter – you might decide to short-sell TRY/USD.

Leverage

An additional benefit that the best spread betting UK brokers offer is leverage. In a nutshell, leverage allows you to trade with more money than you have deposited in your trading account. Leverage is usually displayed as a ratio – like 1:5. This means that a £50 stake would be amplified by a factor of 5 – taking your position to £250. Or, a leverage ratio of 1:20 would boost a £50 stake to £1,000.

All of the spread betting UK platforms that we review later in this guide offer leverage. The limits that you have access to as a UK retail trader are capped by the FCA to ensure you do not trade with more than you can afford to lose.

  • The most you can get is 1:30 – which is offered on major forex pairs like EUR/USD or GBP/USD.
  • You can get 1:20 on major indices and gold – and 1:10 on non-gold commodities.
  • UK spread betting platforms offer 1:5 on shares.

If you’re new to spread betting leverage – check out the example below:

  • Let’s say that you want to trade gold – which is priced at $1,805 per oz
  • You decide to place a buy order on this trade – meaning that you think the price of gold will rise
  • You stake £1 per point at leverage of 1:20. As such, you are amplifying your position by a factor of 20x
  • A few hours later, gold has risen to $1,810 per oz – which represents an increase of 5 points on this market
  • Ordinarilly, you would have made a profit of £5 on this trade (5 points x £1 per point)
  • However, you applied leverage of 1:20 – so your profit is boosted to £100 (£5 x 20)

You might be looking at the above example and think that applying the maximum amount of leverage on each spread betting order sounds like a no-brainer. However, it’s important to remember that while leverage can boost your profits – it will also do the same for your losses.

For example, if you went short on crude oil at $1,805 per oz and it dropped by 5 points – your losses on the above trade would have been boosted from £5 to £100. As such, tread with caution when applying leverage.

Best Spread Betting Brokers UK

If you have read our spread betting UK guide up to this point – then you should now have everything you need to go started with your first buy or sell order. However, you won’t be able to spread bet without having a top-rated broker by your side.

To save you from having to conduct countless hours of research – below we review a selection of the very best UK spread betting brokers in the market right now.

1. Capital.com – Overall Best Spread Betting Broker UK

capital.com reviewLook no further than Capital.com – which is the overall best spread broker in the UK for 2021. This top-rated trading platform is authorized and regulated by the Financial Conduct Authority (FCA) and covered by the Financial Services Compensation Scheme (FSCS). As such, you can place spread betting UK orders in the knowledge that you are using a safe and credible broker.

At Capital.com, you will have access to thousands of spread betting markets. This includes over 138+ forex pairs, 31 commodities, 26 indices, and more than 3,600 shares. The latter consists of stocks listed on the FTSE and AIM in the UK, as well as markets in the US, Europe, Asia, and the Middle East. Regardless of which spread betting market you decide to trade – Capital.com charges 0% in commission. Spreads are super-tight too. For instance, the spread on silver starts at just 0.018 points and EUR/USD at 0.6 points.

capital.com review

In terms of getting started, you can open a Capital.com account in less than two minutes. If depositing funds with a debit/credit card or e-wallet – you only need to fund your account with £20. Bank wires require at least £250. Either way, there are no fees to deposit or withdraw funds at this platform. Capital.com offers buy and sell positions on all markets – as well as leverage within FCA limits. You can trade on the main Capital.com website or download the provider’s mobile app – which is compatible with iOS and Android devices.

Pros

  • Top-rated spread betting and CFD broker
  • Regulated by the FCA
  • Minimum deposit just £20 (debit/credit cards and e-wallets)
  • 0% commission on all markets
  • Tight spread and no deposit/withdrawal fees
  • Thousands of financial markets supported
  • Great for beginners

Cons

  • Advanced traders might find the platform too basic
  • Minimum deposit of £250 on bank transfers

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.25% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider.

2. AvaTrade – Best Spread Betting Broker UK for MT4

avatrade reviewIf you have a bit of experience in the online trading arena – then you will likely find the MT4 platform conducive for your skillset. After all, this popular third-party trading platform comes packed to the rafters with advanced tools and features. This is inclusive of technical indicators, chart drawing tools, simulators, customized orders, and even the ability to install a trading robot.

If MT4 is the platform that you wish to access the spread betting market on – then AvaTrade is a great option to consider. This trusted CFD and spread betting broker is regulated in seven jurisdictions – so safety should be of no concern. Although you will only have access to 200+ spread betting markets, this does include the likes of stocks, commodities, ETFs, forex, and indices. As such, AvaTrade covers the most liquid marketplaces in the global trading scene.

avatrade review

Best of all, AvaTrade is a 0% commission broker – so once again, you only need to cover the spread. We also like the fact that AvaTrade offers a free demo account platform. All you need to do to gain access is open an account, download MT4, and then sign in with your AvaTrade credentials. If you want to start spread betting with real money – the minimum deposit is just £100. You can fund your account instantly with Visa or MasterCard and there are no deposit fees to contend with.

Pros

  • Regulated in seven jurisdictions
  • 0% commission on all supported markets
  • Offers spread betting and CFD instruments
  • Minimum deposit of just £100
  • Free demo account
  • Supports MT4 and MT5

Cons

  • Spread betting department limited to just 200+ financial markets
  • Mobile app is a bit cumbersome to use

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money

3. Peppertstone – Best Spread Betting Broker UK for Low Fees

peppertstone reviewPepperstone is a popular CFD and spread betting broker that is authorized and regulated by the FCA. The platform is home to over 1,000+ financial markets that cover a wide range of asset classes. This includes dozens of forex pairs – with the broker offering a great selection of majors, minors, and exotics. You can also trade indices like the FTSE 100, Dow Jones, and S&P 500.

If you’re interested in commodities – Pepperstone offers spread betting markets on gold, silver, oil, natural gas, cotton, cocoa, and much more. In the stocks and shares department – you will have access to four major spread betting markets. This covers exchanges in the US, UK, Germany, and Australia. When it comes to pricing, Pepperstone allows you to spread bet on a 0% commission basis.

peppertstone review

Much like Capital.com, you only need to cover the spread itself. To give you an idea of how competitive Pepperstone is in this respect – the spread on EUR/USD starts at 0.6 points, while on gold this stands at just 0.05 points. There is no minimum deposit requirement at Pepperstone – and you can instantly fund your account with a debit or credit card. You can access the spread betting via the Pepperstone website or through MetaTrader4 – which you can download to your desktop device. There is also a Pepperstone iOS/Android mobile trading app.

Pros

  • 1,000+ markets covering shares, indices, commodities, forex, and more
  • Spread betting and CFD trading markets
  • 0% commission accounts available
  • No minimum deposit
  • Authorized and regulated by the FCA
  • Compatible with both MT4 and MT5

Cons

  • Pricing structure is a bit confusing
  • Education department is limited

Capital.com – Recommended Spread Betting Broker

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

 

How to Start Spread Betting UK Today – Full Walkthrough

This guide has explained everything there is to know about spread betting in the UK. We have also reviewed the best UK brokers that are active in this scene. To conclude this comprehensive guide – we are going to walk you through the step-by-step process of how to start spread betting from the comfort of your home.

Step 1: Open a Spread Betting UK Account

Just like you would at a traditional stockbroker – you will first need to open an account with your chosen spread betting platform. As noted in our reviews earlier, Capital.com is the best spread betting broker for the job – as you will have access to thousands of commission-free markets.

join capital.com

To open an account with Capital.com – visit the provider’s website and click on the ‘Trade Now’ button. Next, follow the on-screen instructions by entering your personal information and contact details.

Step 2: Upload ID

You will now be asked to upload a copy of your government-issued ID as per KYC (Know Your Customer) regulations. This can either be a passport or a driver’s license. Capital.com should be able to validate the ID document instantly.

Step 3: Deposit Funds

Now it’s time to deposit some funds so that you can start spread betting with real money. If opting for a debit/credit card or e-wallet, not only will this be processed instantly – but the minimum deposit is just £20. However, if opting for a bank wire – the minimum jumps up to £250 and you’ll need to wait a few days for the funds to arrive.

Step 4: Search for Spread Betting Market

You can now search for the spread betting market that you want to trade. In the example below, we are looking to trade Twitter shares – so we enter the name of the company into the search box.

spread betting capital.com

Step 5: Place Spread Betting Order

The final part of the process is to place your first spread betting order.

spread betting capital.com

For this, you’ll need to:

  • Choose from a buy or sell order depending on whether you think the asset will rise or fall in value
  • Enter your stake per point
  • Choose your leverage ratio – if applicable

Once you are happy with the information entered, confirm your spread betting order.

Spread Betting UK – Conclusion

In summary, spread betting is a great financial arena to consider if you are looking to trade instruments such as shares, gold, oil, indices, or forex. After all, you won’t be required to pay any capital gains or stamp duty tax – so you get to keep all of your profits for yourself. Plus, spread betting UK platforms like Capital.com allow you to trade at 0% commission – alongside leverage and short-selling facilities.

Getting started at Capital.com takes no time at all – so you could be placing your first spread betting position in less than five minutes!

Capital.com – Best Spread Betting Broker UK

capital.com review

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.25% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider.

 

FAQ

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About Kane Pepi PRO INVESTOR

Kane Pepi writes for several high profile publications such as InsideBitcoins, the Motely Fool, and Learnbonds. Based in Malta, Kane is extremely skilled at complex subjects related to financial matters - including a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and actively engaged in Doctorate Degree research, for the money laundering threats of the blockchain economy.