Spread betting explained – why it exists only in the UK and Ireland

Financial spread betting lets you bet an amount per point on a market's movement. It was pioneered in London in the 1970s – IG started as IG Index in 1974, offering bets on the price of gold – and remains popular with UK traders mainly because of its tax treatment.

#How it works

You "buy" the FTSE 100 at £2 per point at 9,000. If it rises to 9,050, you make 50 × £2 = £100. If it falls to 8,950, you lose £100. The mechanics – leverage, margin, spreads and overnight financing – are almost identical to a CFD.

#Spread bet vs CFD

The tax advantage is HMRC's general treatment of betting for private individuals; it may not apply if spread betting is your main source of income. Losses are not tax-deductible, so for a loss-making trader a CFD can in fact be more tax-efficient.

#Why EU residents can't use it

Spread betting is regulated as a financial derivative in the UK but falls under gambling rules or is not permitted as a financial product in most EU countries. Providers therefore offer it only to UK and Irish residents. In Ireland the tax treatment differs from the UK, so Irish traders should check with Revenue.

#Protection

UK spread-betting firms are authorised by the FCA, apply the same retail leverage limits, negative balance protection and margin close-out rules as for CFDs, and are covered by the FSCS (up to £85,000) and the Financial Ombudsman Service. See the United Kingdom guide and our list of FCA-authorised firms.