What is spread betting? It is a way to speculate on whether a market’s price will rise or fall, staking a set amount in pounds for every point it moves, without owning the asset. It is leveraged, so a small deposit controls a large exposure and losses can build quickly.
Quick answer: what is spread betting?
Spread betting is a leveraged UK product where you stake an amount per point, such as £2 a point, on a market moving up or down. Your profit or loss is the stake multiplied by the points it moves, minus costs such as the spread and overnight funding. Losses can exceed what you planned.
How spread betting works: £ per point
Every spread bet has three parts: the market, the direction and the stake. You buy (go long) if you think the price will rise, or sell (go short) if you think it will fall. The stake is how many pounds you win or lose for each point the price moves.
A point is the unit the provider quotes for that market. On an index such as the FTSE 100, one point is usually one index point; on forex it is often one pip, but check the market’s details, because providers define it differently.
- Profit or loss = stake × points moved in your favour or against you.
- Exposure = stake × the market price. £2 a point on an index at 8,000 is like holding £16,000 of it.
- No ownership: you never hold the asset, so going short is as easy as going long.
What a spread bet costs
The provider quotes two prices: a sell price below the market and a buy price above it. The gap between them is the spread, and it is the main cost you pay on every trade. If you buy, the sell price must rise past where you bought before you are in profit.
The spread
Example: an index is quoted 7,999 to 8,001, a 2-point spread. At £2 a point, opening and closing the bet costs £4 before the market moves at all. Spreads can widen when markets are thin or news is due, which raises the cost and can trigger stops.
Overnight funding
Most short-term bets are rolling daily bets that stay open until you close them. Each night you hold one, the provider makes a funding adjustment, usually a charge based on an interest benchmark plus its own fee. Over weeks it can turn a winner into a loser, so check the provider’s key information document first.
Dated bets, such as quarterly bets, carry no nightly charge but usually have a wider spread.
Margin and UK leverage limits
To open a spread bet you put down margin, a deposit that is a percentage of your exposure. The FCA’s permanent rules for retail CFDs, which explicitly include financial spread bets, limit retail leverage to between 30:1 and 2:1. For major indices the cap is 20:1, a 5% margin; for major currency pairs it is 30:1.
Leverage magnifies losses as much as gains, because profit and loss are worked out on the full exposure, not the deposit. Our guide to margin and leverage for UK beginners has the full table of limits and shows how close-out works.
Stops: normal and guaranteed
A stop closes your bet automatically if the price reaches a level you set. It is the main way to decide your loss in advance, but the two kinds behave differently in a fast market.
| Factor | Normal stop | Guaranteed stop |
|---|---|---|
| Where it fills | Next available price | Exactly at your level |
| If the market gaps | Can fill well past your level | Still fills at your level |
| Cost | No extra charge | A premium, usually charged if it is triggered |
| Limits | Can sit close to price | Usually a minimum distance from price |
A normal stop can slip over a weekend gap or sudden news, so the real loss can exceed the plan. Where the stop goes matters as much as its type; our guide on where to place a stop loss using price action covers that.
A worked example in pounds
Example: a hypothetical trader has a £5,000 account and risks 1% per trade, which is £50. They want to buy an index quoted 7,999 to 8,001, with a stop 50 points below their entry.
- Set the stake from the stop. £50 ÷ 50 points = £1 a point.
- Check the exposure and margin. £1 × 8,001 = about £8,000 of exposure; at 5% margin that is about £400 held.
- If the stop is hit. 50 points × £1 = a £50 loss, plus any slippage and funding.
- If the sell price later reaches 8,081. 80 points × £1 = £80, before overnight funding.
Now suppose they stake £10 a point instead, because the margin allows it. Exposure is about £80,000 and margin about £4,000, so most of the account is tied up. The same 50-point stop now costs £500, a tenth of the account, and a 300-point move against them would take equity down to half the margin required, where the provider must start closing the position.
Our step-by-step guide on how to calculate position size for a spread bet gives the formula for any market, and our guide to how much to risk per trade helps you pick the percentage.
Regulation, protection and tax
Financial spread betting in the UK is regulated by the FCA, not as gambling. Check any firm on the FCA’s Financial Services Register before you deposit money, because protections depend on the firm being authorised.
What protection does and does not cover
- Negative balance protection: as a retail client you cannot lose more than the funds in your account. You can still lose all of them.
- 50% margin close-out: the provider must close positions as your funds fall to half the margin needed, which can lock in a loss.
- FSCS: the Financial Services Compensation Scheme can help customers of an authorised firm that has failed, within its limits. It does not refund losses from trades that go against you.
- Professional status: if you opt up to professional client, you give up retail protections such as the leverage limits.
Tax
Spread betting profits are generally free of Capital Gains Tax and stamp duty for UK residents, but tax treatment depends on your circumstances and can change. HMRC’s Business Income Manual says a person placing a spread bet is not normally carrying on a trade, so profits are not taxed and losses get no relief. Tax is never a reason to place a trade.
Common mistakes with spread betting
- Choosing the stake first. £10 a point sounds small until the stop is 100 points away. Set the stake from the stop and your risk.
- Treating margin as the risk. The deposit is not your maximum loss; the stake times the move is.
- Forgetting funding. A rolling bet held for weeks pays a charge every night.
- Trading on tax. A tax-free loss is still a loss, and it gets no relief.
If you are weighing up the alternative product, our comparison of spread betting vs CFDs for UK traders sets the two side by side.
Frequently asked questions
Is spread betting gambling?
HMRC normally treats a spread bettor as not carrying on a trade, which is why profits are usually untaxed. For regulation, though, it is a leveraged product supervised by the FCA, with the same limits as CFDs.
Can you lose more than you deposit when spread betting?
As a retail client of an FCA-authorised firm, negative balance protection means you cannot lose more than the funds in your account. You can still lose all of them, and quickly, because of leverage.
Can I spread bet on indices and forex?
Yes, most providers offer indices, forex, commodities and shares. Our beginner’s guide to trading indices in the UK shows how a spread bet fits an index trade, and our UK guide to trading forex for beginners covers currencies.
Next steps
Our rules-based risk management model turns your risk per trade and stop placement into a plan you can follow every time.
Building a rules-based risk model is part of our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
