Diff Spread Betting and CFD

[Guest Sumitpratapsing]

Hi All,

 

I am beating my head against the wall to understand this key difference.

 

Can you please explain the difference bw spread betting and CFD.

 

E.g. I can trade on FOREX (e.g. GBP/USD) on going up or down , accordingly I can generate profit or loss.

 

In tax purpose, spread betting is tax free as I understand.

And CFD comes under capital gain tax. Appreciate you can touch tax topic also in your reply.

 

Many Thanks,

Sumit

[QTPI]

I agree it is a bit of a mystery.

 

I'm no expert but if the profits are taxed then losses should gain a relief (against other capital gains). 

 

This appears to the only benefit,  but like you I would like to hear from others with more experience of CFD trading.

[JamesIG]

You may find this link on the difference between CFD and Spread Betting interesting. Although we can't advise on tax implications you can find a number of important and interesting information on HMRC's website. 

 

The basic reason that CFD's are liable for tax is that at some point you own something - an actual contract on the price movement of the underlying asset. Spread Betting however is a speculative bet on the price movement and you never actually own anything.