CFDs vs Spread Betting

Hi all. Can somebody explain why CFDs are taxable under capital gains but spread betting is not (in the UK and Ireland). They are more or less the exact same thing. Thanks!

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I think it comes down to spreadbetting is just based on direction of the market - whereas CFD is the exchange of contracts based on the underlying value of an asset.

Honestly - no idea. Probably some paperwork loophole.

It could be something like that. They seem to behave in the exact same way. I’m trying to find the catch and how spread betting fell through the tax cracks.

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roll on jan/feb to hear if spread betting will be added, as was CFD a year before :frowning: .

Highly recommend spread betting with CMC as the spreads are tight, you reach profit and can exit a trade, before T212 trade begins to go green… breath of fresh air :wink:

i’m surprised CFD is taxable considering companies like T212 spread/policies etc, you’d think there would be more legislation/rules to follow as its literally become gambling now

Yes the regulatory side of CFDs seem to favour the providers and brokers rather than the retailers so in that sense it is like gambling your cash hoping no surprises come.

It just seems a little too good to be true. Why would anybody choose taxable CFDs over non taxable Spread Butts. Usually when something seems too good to be true, it is!

I opened a practice account on CMC to give it a go. The interface is a bit dodgy but it it works well.

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Remember CFD’s are offsetable against CGT.
So you could always run your winners on spreadbetting and your hedge losers on CFD.
Best of both worlds then.

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True yeah, a pick n mix of sorts. I still can’t shake the dubiousness. I feel like there is something I’m missing!

No idea really - I havn’t actually done spreadbetting live as yet - but it looks the same to me when compared to CFD.

Tbh the bottom line is they are essentially the same. The key technical difference is that spreadbetting you are literally just betting a set amount per point that the value of the underlying moves whereas with CFDs you are trading an actual derivative rather than making a bet.

Hence why spreadbetting is taxed (or rather not taxed) under gambling and CFDs are taxed as CGT.

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Cool, that makes sense. So you’re just making a wager with the broker rather than trading a derivative? That adds up, thanks!

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As I understand it, yep - pretty much that.

From a broker perspective risk management is similar, they hedge the exposure that isn’t matched by different users going long vs short.