Index spread betting and CFD trading: Which is best?
Find out the key differences with index spread betting vs CFD trading. We’ll explain which account wrapper suits different trading strategies and explain why tax-free profits aren't the only metric that matters if you’re looking to trade global indices.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
Trading index derivatives can be fast, highly leveraged, and definitely not designed for casual beginner investors. In fact, according to Finder’s trading stats, less than 1% of Brits trade CFDs, making them the least popular asset class in the UK. The risk profile is a huge reason why: between 50% and 71% of retail CFD accounts lose money, with the average loss sitting around £2,200.
However, for experienced traders looking to speculate on global benchmark movements like the ever-shifting FTSE 100 or the ever-popular S&P 500, index spread betting and CFDs offer flexible hedging or shorting opportunities and the ability to use leverage to maximise positions.
Choosing between the two methods usually comes down to your tax position, execution needs, and account size. And, only a few top UK brokerages such as Spreadex, Capital.com and IG offer the ability to trade indices using spread bets or CFDs.
Spread betting indices key takeaways
Tax efficiency. UK financial spread betting is exempt from Capital Gains Tax (CGT) and Stamp Duty, making it the preferred wrapper for UK retail traders but trading index CFDs can provide other tax-efficiencies.
Platform options. Not all trading platforms allow the option to trade CFDs or spread bet indices, popular examples include Spreadex, IG, Capital.com and CMC Markets.
Hedging power. Index CFDs allow you to offset capital losses against taxable trading profits, making them useful for corporate accounts and multi-currency portfolio hedging.
Leverage caps. FCA regulations cap retail leverage at 20:1 (5% margin requirement) on major stock indices and 10:1 (10% margin requirement) on minor indices.
High-risk. Both indices spread bets and CFDs are complex, highly leveraged products involving trading risks. Gains are amplified but so are potential losses if the market moves against your position.
Spread betting vs CFDs for trading global indices
While index spread bets and index CFDs track the exact same underlying exchange prices, their position mechanics, base currencies, and HMRC tax treatments diverge significantly:
Spread betting indices example. You choose a stake size in pounds per point. If you go long on the FTSE 100 at £10 per point and the index rises 40 points, your tax-free profit is £400. Because positions are set directly in GBP, you skip foreign exchange conversions on global markets.
Trading index CFDs example. You buy or sell a contract that exchanges the price difference of an index between opening and closing the trade. Trades settle in the index’s home currency (trading the S&P 500 in USD), meaning FX conversions apply unless you maintain a multi-currency trading account.
Feature
Index spread betting
Index CFD trading
Pricing mechanism
Stake per point movement
Stabdardised contracts / lot sizes
UK tax treatment
CGT-free and Stamp Duty-free
Subject to CGT (losses offsettable)
Base currency
Denominated directly in GBP
Denominated in the index’s native currency
Retail leverage (FCA caps)
20:1 Major / 10:1 Minor
20:1 Major / 10:1 Minor
Base currency
Active UK retail traders seeking tax-free profits
Corporate accounts, international traders and portfolio hedging
How to get started spread betting indices and trading index CFDs
Here are some simple steps to follow if you want to start trading indices:
Select account structure. Open a financial spread betting account if you want tax-free returns, or a CFD account if you require asset hedging in foreign currencies.
Complete FCA appropriateness checks. Regulated platforms must assess your trading experience, knowledge of leverage, and risk tolerance before granting margin access.
Fund your margin wallet. You can usually deposit funds using bank transfer, debit card, or open banking. Ensure you hold sufficient excess margin above the minimum FCA requirement to withstand intraday volatility.
Analyse index liquidity hours. While major indices can be traded 24 hours a day, underlying market spreads are tightest during primary exchange trading hours.
Place risk-managed orders. Select your stake size (£ per point or contract lot), and attach an appropriate trading order type like guaranteed or trailing stop-loss orders, then confirm execution via web, mobile app, or direct telephone desk.
Which brokers support global index CFDs and spread betting?
Selecting the best index CFD trading or spread betting provider requires looking past standard marketing spreads to evaluate order execution, margin utilisation, and human dealer availability during market shocks.
Handling large trade sizes. If you’re planning to place larger trades, you need a brokerage that can handle this, ideally options with liquidity depth and minimal slippage on block orders such as Spreadex or IG.
Human dealer access. While many neo-brokers rely exclusively on automated chat bots, brokers with established trading desks like Spreadex or Capital.com allow traders to pick up the phone and execute trades directly with a senior dealer.
Regional restrictions. Brokers such as eToro and XTB cater globally to index CFDs but do not support UK-regulated tax-free spread betting. Ensure your provider offers true spread betting wrappers if you’re in the UK.
Which indices can I spread bet or CFD trade?
Broker coverage ranges from high-volume headline benchmarks to niche sector indices and small-cap baskets:
Major global benchmarks. High liquidity, lowest spreads, and maximum allowable retail leverage.
Minor and regional indices. Lower liquidity, wider variable spreads, reduced retail leverage.
Small and mid-cap market depth. Certain UK-based platforms (such as Spreadex) offer proprietary pricing down to mid-and-small-cap levels.
Spread betting on the FTSE 100 vs S&P 500
Feature
FTSE 100 (UK 100)
S&P 500 (US 500)
Underlying companies
Largest 100 UK-listed companies
500 large-cap US companies
Base currency
British Pounds (GBP)
US Dollars (USD)
Market volatility
Generally moderate; heavily weighted towards financials, energy, and defensive sectors
Higher volatility; heavily weighted towards technology and growth stocks
Core trading hours
08:00 – 16:30 GMT
14:30 – 21:00 GMT
Point value structure
Trades in 1.0 point movements
Trades in 0.1 or 1.0 point movements (depending on broker)
Currency risk for UK traders
None; native GBP pricing
Stake is set directly in £ per point, removing direct FX conversion headache
Strategy examples
Range trading and UK macro economic events
Momentum, breakout strategies, and earnings plays
Pros and cons of trading indices
Pros
You can get large index price movement exposure with only a fraction of the full trade cost.
The ability to profit from market downturns by shorting or hedging against existing stock portfolios without borrowing physical shares.
Trading with 24-hour market access allows you to position trades around out-of-hours earnings reports, international market opens, or macroeconomic updates.
When spread betting indices there’s no Stamp Duty or CGT and if you’re trading indices CFDs you can offset losses.
Most trading platforms charge no commissions when you’re buying or selling index spread bets or CFDs.
Cons
Rapid price movements can lead to swift margin calls or automated position liquidation due to leverage.
Some platforms offer tighter spreads on indices compared to others.
Positions held past the daily market close incur overnight holding costs.
Trading during low-liquidity overnight sessions can expose orders to wider spreads and higher execution slippage.
Frequently asked questions
What is index spread betting and how does it work?
Index spread betting lets you speculate on whether an index (like the FTSE 100 or S&P 500) will go up or down without buying the underlying shares. Because it’s a leveraged product, you only put up a small deposit (margin) to open the position, but your profits and losses are calculated on the full size of the trade.
What is the tax treatment of spread betting on indices in the UK?
Under current UK HMRC rules, spread betting profits are exempt from CGT and Stamp Duty. Because HMRC classifies spread betting as gambling, you get to keep 100% of your trading gains.
The catch? You can’t offset spread betting losses against other tax liabilities (such as gains made from selling property or shares). Keep in mind, tax treatment depends on individual circumstances and can change in the future.
How is the price of an index calculated in spread betting?
A spread betting broker like Spreadex calculates an index price using the real-time weighted prices of all individual stocks within that index or the underlying futures market. The broker takes this live underlying price and applies their own buy and sell quotes around it, known as the bid-ask spread.
Which brokers support global index CFDs?
Most UK-regulated brokers support global index CFDs. Leading platforms include Spreadex, IG, CMC Markets, and Capital.com. Other platforms like eToro and XTB also support global index CFDs but don’t offer UK tax-free spread betting options.
What are the FCA leverage limits for spread betting indices?
Under FCA rules, maximum retail leverage for major stock indices is capped at 20:1, requiring a minimum 5% margin deposit. For minor or regional indices, leverage is capped at 10:1, requiring a 10% margin deposit. Professional-classified accounts may access higher levels of leverage if they meet strict regulatory criteria.
Why do high-volume active traders use telephone dealing desks?
During extreme market volatility, online trading apps and servers can experience connectivity delays or order freezes. Whereas platforms like Spreadex or Capital.com maintain a traditional, human dealing desk, allowing active power traders to execute large block orders or manage existing margin positions over the phone.
Can you spread bet indices 24 hours a day?
Yes, major providers offer 24-hour out-of-hours market coverage on key global indices. However, spreads during out-of-hours sessions are typically wider than during main exchange operating hours to reflect reduced global underlying liquidity.
Is spread betting on indices completely tax-free in the UK?
Index spread betting lets you speculate on whether an index (like the FTSE 100 or S&P 500) will go up or down without buying the underlying shares. Because it’s a leveraged product, you only put up a small deposit (margin) to open the position, but your profits and losses are calculated on the full size of the trade.
George is a deputy editor at Finder. He has previously written for The Motley Fool UK, Nasdaq, Freetrade, Investing in the Web, MoneyMagpie, Online Mortgage Advisor, Wealth, and Compare Forex Brokers.
He's focused on making personal finance and investing engaging for everyone. To do this he draws from previous work and his Level 4 Diploma for Financial Advisers (DipFA), sharing what he’s learnt. When he’s not geeking out about money, you’ll find him playing sports and staying active.
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