Does Capital.com offer spread betting? Yes, Capital.com offers spread betting on over 4,500 markets on its easily navigable platform. Spread betting generally competes with CFDs and short-term stock trading, which are taxable and subject to CGT. Practically, it matters to UK traders as a profitable spread better can keep 100% of gains that significantly outperform equivalent CFD after tax.
Introduction – What is Spread betting and why does it matter in the UK
Spread betting is one of the ways to speculate on whether the price of a financial asset will go up or down without actually owning it. In the UK, tax treatment for spread betting is unique, and this is the biggest reason it matters for UK traders. Let us see more:
- In the UK, spread betting profits are generally tax-free and they are treated as gambling gains, subject to HMRC rules and individual circumstances. This makes it unusually attractive compared with other forms of trading.
- More importantly, spread betting is not available to clients outside the UK.
What is Spread betting? (Basic definition)
What is spread betting and how does it work? Spread betting is typically a type of speculation where you bet on whether a market will rise or fall, rather than owning the underlying asset.
Key aspects of Capital.com spread betting
The key aspects of Capita.com spread betting are as follows:
- Bet size and profit/loss: Your profit or loss depends on your £ per point stake and how far the market moves.
- Leverage and margin: You only deposit a small percentage (margin) while controlling a larger position.
- Costs: Mainly spreads, overnight funding fees, and GSLO charges.
- Risk management: Tools like stop-loss, take-profit, and GSLO help manage potential losses.
- Tax treatment: Profits are generally tax-free in the UK under HMRC rules (subject to exceptions).
How Spread betting works on Capital.com
Capital.com spread betting is very simple and easy. It offers two types of spread bets namely, Daily Funded Bets (DFBs with no fixed expiry and forward bets with fixed quarterly expiry. Let us look into the key features of spread betting trading on Capital.com.
- In order to open a position in Capital.com, you are required to deposit a percentage of the total value of the position in your Capital.com spread bet account, which is the initial margin requirement.
- Capital.com may also require the investor to deposit additional funds to cover any changes in margin requirements and running losses. Failure of a deposit may result in the closure of the spread bet position by Capital.com.
- Spread bets, especially DFBs, do not have a maturity date or any minimum holding period; you must maintain sufficient margin to keep positions open, as defined by Capital.com’s margin requirements, which may vary by market and volatility.
- If you are a Pro trader, you can enjoy the benefits like cash rebates, lower margins, higher leverage, access to premium hospitality events, and much more. For more details on UK leverage limits, refer to our guide.
Spread betting vs CFD trading on Capital.com
CFDs vs spread betting-Understand the key differences: Though spread bets are structured differently from CFDs, their costs are identical, and both use leverage. Spread betting is exempt from a few aspects:
| Spread betting UK | CFDs |
|---|---|
| Exempt from Capital Gains Tax (CGT). | Subject to Capital Gains Tax (CGT). |
| Use a £-per-point stake. | Use contract sizes. |
| Offered as Daily Funded Bets (DFBs) or forwards, and sometimes comes with an expiry. | No fixed expiry. |
| Cost is usually embedded within the spread. | May charge a commission on certain markets. |
Benefits of Spread betting for UK traders
Since spread betting is legally classified as gambling in the UK, the profits are free of Capital Gains Tax (CGT) and Income Tax under HMRC rules. The losses are non-tax-deductible, too.
- Spread betting is legal in the UK and offered by the FCA-regulated firms to eligible UK residents. Consumer protections like Negative Balance Protection (NBP) also apply to retail clients. Learn FCA regulations and their protections in the UK.
- You can have leveraged market access on trading UK & global shares, indices, forex, commodities, crypto, etc.
- You can profit from both rise and fall, and the cost is built into the spread.
- Spread bets are often GBP-based, which may reduce FX conversion.
Risks and considerations when Spread betting
Spread betting does not have a fixed term and expires only when you choose to close your positions. Hence, regular monitoring is required to determine the appropriate time to close it.
What are the disadvantages of spread betting? The disadvantages of spread betting are as follows:
- Spread bets are intended for short-term trading and do not suit long-term investments.
- Beware of currency risk, where you may receive payments in a different currency. The final return you get depends entirely on the exchange rate.
- Guaranteed stop-loss orders (GSLOs) in risk management tools can provide assurance that your trade will be executed at the price you expect. But they also incur a fee if triggered.
How to open a Spread betting account on Capital.com
Go to Capital.com’s official site or app and sign up with your email address and 8-character password to continue opening the account. You can also log in via Gmail or an Apple account.
- Provide basic information of your personal details. Following that you need to provide your trading experience and details about your investment knowledge. Submit a valid identity document for verification.
- Choose “Spread betting” account type.
- Now you will be able to deposit funds and start trading immediately. Capital.com generally requires a low minimum deposit, which may vary by payment method. You can use bank transfers via Truelayer, debit/credit cards, Apple Pay or Google Pay for funding.
Step-by-step: Placing your first Spread bet on Capital.com
Here is how to place your first spread bet on Capital.com once your account is set up and funded.
- Log in to your trading account, in app or web, and select “spread betting account”.
- Browse “Markets” and choose a market you want to spread bet. Capital.com offers thousands of spread betting markets: indices, commodities, forex, crypto, etc.
- Click the instrument you want to bet. Here you will see two prices, buy and sell quotes – this is the spread.
- If you want to go long, buy, and vice versa.
- Set your stake – £ per point.
- Before executing your bet, you can add a stop-loss price level, take-profit price level, and GSLO (Guaranteed Stop-Loss Orders) level that help manage risk.
- Review the market, position, and stake point and click “Place Trade” to open the trade.
- Once the trade is live, you can see the P&L of your position. You can also adjust your stop-loss or take-profit price levels anytime.
- During market hours, you can close your spread betting position to realise profit/loss.
Spread betting costs and fees on Capital.com
Capital.com’s spread bet platform makes money from spreads, guaranteed stop-loss, and overnight funding, and doesn’t charge commission.
- Spread – % – Spread cost is variable throughout the day and available per instrument, and the main part of your Capital.com trading fees.
- Guaranteed stop loss – A fee applies when a guaranteed stop loss is executed.
- Overnight fees – Apply when you keep a position overnight, after a certain cut-off time defined on Capital.com’s platform. Fees vary with the relevant interest rate benchmark.
- FX conversion fees – When you trade on a market denominated in a different currency, you will pay a conversion fee of 0.7%.
Tax treatment of Spread betting in the UK
Although spread betting is treated as gambling for tax purposes, it is regulated by the FCA when offered by authorised financial firms. Spread betting is more attractive in the UK, especially for its tax treatment.
- No Capital Gains Tax (CGT)
- No income tax
- No stamp duty
- Losses are not tax-deductible. However, you cannot offset your losses against your taxes.
Though there are substantial tax advantages, we cannot rule out the exceptions to the no-tax rule.
- HMRC treats your spread betting profits as taxable when the activity is shown to be run as a business rather than gambling.
- If your activity is highly organised and systematic and you trade full-time as your main income, where you rely on it as a livelihood, HMRC could try to tax spread betting profits.
- If you trade through your limited company, you will need to pay corporation tax, because HMRC considers this speculation to be a trading activity of your company.
Do you pay capital gains on spread betting? In the UK, spread betting profits are generally exempt from Capital Gains Tax (CGT), as they are treated as gambling gains under HMRC rules.
Tips for beginners on Capital.com
Spread betting beginners UK: Leveraged products like spread betting and CFDs can be powerful but unforgiving, especially at the start. Our beginner instructions are highly essential for new traders for spread betting at Capital.com.
- Practise on a demo trading account, as this would be your ideal introduction to the markets. Demo trading enables you to learn the principles of spread betting trading without risking real money.
- Capital.com lets you set stops easily: use them before placing your trade. GSLO is optional, yet useful for news-heavy markets.
- Start with the beginner-friendly markets on Capital.com, such as UK 100 (FTSE), US 500 (S&P 500), and major FX pairs. They generally have tighter spreads and better liquidity.
- Avoid overnight trading because it adds to your trading costs and makes it harder to control risk. It is better to trade during active hours on UK indices and US indices and close the trade the same day.
- Be cautious about leverage and focus on worst-case loss. It is wise to avoid overtrading and trading during major economic news until you get hands-on experience. The goal of a beginner should be capital preservation, not income.
Conclusion – Is Spread betting right for you?
Is spread betting profitable? It can be profitable due to leverage and tax advantages, but it also carries risk. Spread bets are typically complex products and are used only for speculative purposes. If you are a buy-and-hold investor, spread bets may not be suitable for you. Additionally, spread betting requires regular monitoring, failing which may lead to potential loss.
Spread bets are intended for investors who have sufficient knowledge and experience to understand the risks in trading leveraged products. It is necessary that investors have appropriate financial means to bear the loss of initial capital.
If you are looking for safer or regulated alternatives, explore our list of the best FCA-regulated brokers in the UK.
| Disclaimer: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. |
Pro Tip
Before initiating spread bets, it is essential to review the broker’s overnight costs, risk-management tools, and margin rules, as these can significantly affect your short-term trading outcomes.
FAQs
1. Is spread betting on Capital.com tax-free in the UK?
Yes, spread betting profits are generally tax-free in the UK, as they are treated as gambling gains under HMRC rules, subject to HMRC interpretation and individual circumstances.
2. What markets can I spread bet on Capital.com?
You can spread bet on indices, commodities, forex, shares, and cryptocurrencies on Capital.com.
3. What are typical spread betting costs on Capital.com?
Capital.com offers tight spreads that are competitive. The size of the spread can vary throughout the day.
4. Can I lose more than my deposit when spread betting on Capital.com?
If you are classified as an eligible retail client and trade using Capital.com’s FCA-regulated spread betting account, negative balance protection generally prevents losses from exceeding your deposited funds, subject to account terms, execution conditions, and trading circumstances.
5. Is spread betting better than CFD trading on Capital.com?
Spread betting in Capital.com is more tax-efficient than CFD trading as your profits are generally CGT-free.
6. What does +3.5 mean in spread?
3.5 is used in betting to show a 3.5-point advantage, but in financial spread betting, it simply refers to the difference between buy and sell prices.
