Spread betting vs share dealing

Share dealing makes you part-owner of a company; spread betting is a leveraged bet on where its price goes next. That single difference drives everything else — the costs, the tax treatment, the risk, and who each product is really for.

Ownership versus speculation

Buy a share and you own a small piece of a real business. You can hold it for decades, collect dividends and let growth compound, and nobody closes your position because the price dipped. A spread bet gives you none of that. You own nothing: you stake a pound amount per point of price movement, up or down, under a contract with your provider. It is a wager on direction — which is why UK law classes it as gambling, not investing. If the mechanics are new to you, start with what is spread betting.

What each one costs

Share dealing's costs are visible and front-loaded: 0.5% stamp duty on UK share purchases, usually a dealing commission, plus the market spread. Once bought, shares cost little or nothing to hold. Spread betting reverses this. There is no stamp duty and typically no commission; the charge sits inside a wider spread, and daily funded positions incur overnight financing for every night you hold them. That funding drag makes long holds progressively more expensive — the product is built for short timeframes. Our spread betting examples put pounds and pence on both.

How the tax works

Sell shares at a profit outside a wrapper and gains above the £3,000 annual allowance are taxed at 18% or 24% (2026/27 rates). Hold them in an ISA and gains are sheltered entirely. Spread betting profits are currently free of capital gains tax and stamp duty because the bets are legally classed as gambling — see HMRC's guidance at BIM22015, confirmed in October 2025. But the logic cuts both ways: spread betting losses attract no tax relief, and FCA-required disclosures show most retail accounts — typically 60–90% — lose money. A tax break on profits most people never make is worth less than it sounds. Full detail in is spread betting tax-free.

Leverage cuts both ways

Share dealing is unleveraged: invest £1,000 and your worst case is losing £1,000. Spread betting is leveraged, with FCA retail minimum margins of 5% on major indices and 20% on individual shares. At £10 a point with the FTSE 100 near 10,650, you control £106,500 of exposure for around £5,325 of margin. A 5% index fall — roughly 530 points, which markets can deliver in a few weeks — costs about £5,300: essentially the entire deposit. Negative balance protection stops a retail account going below zero, but zero can arrive quickly. Size any position with the margin calculator and read our risk management guide first.

Dividends: real income versus adjustments

Shareholders receive actual dividends — cash to spend or reinvest, and reinvested dividends matter enormously to long-term returns. Spread bettors own no shares, so no dividends are paid. Instead, long positions are credited a dividend adjustment (shorts are debited one) to offset the price drop when a stock goes ex-dividend. The adjustment keeps the bet fair on the day; it builds no income stream and compounds nothing.

Who each one suits

Share dealing suits people building wealth over years: full ownership, no leverage, no overnight funding, ISA shelter and compounding dividends. Time smooths mistakes. Spread betting suits experienced short-term speculators who want leveraged, two-way exposure with money they can afford to lose entirely — and who accept that most retail accounts do not come out ahead.

Bottom line: for most people building wealth, share dealing — ideally inside an ISA — is the foundation. Spread betting is a speculation tool, not a substitute for investing. If you still want to try it, use a demo account before risking real money.