When you buy shares in the traditional sense – this is a long-term strategy that requires little effort in the way of research and analysis. With that said – if you’re looking to trade stock on a short-term basis – it’s well worth considering spread betting shares UK.
In doing so, you can go long or short on your chosen stock, apply leverage of up to 1:5, and best of all – your profits will be exempt from capital gains tax. In this guide, we cover the ins and outs of how Spread Betting Shares UK works and how you can get started with a commission-free trade today.
The main concept of spread betting on shares UK can be a bit confusing at first glance – which is why we suggest reading our guide in full. If, however, you’re strapped for time – check out the quickfire step-by-step guide outlined below.
Step 1: First, join a commission-free spread betting broker. Capital.com allows you to trade thousands of spread betting shares markets from 18 UK and international exchanges.
Step 2: Meet the minimum deposit requirement of £20. Supported payment methods include debit/credit cards and e-wallets.
Step 3: Search for the shares you wish to trade. For example, enter ‘Apple’ into the search box if you wish to spread bet Apple shares.
Step 4: If you think the share price will rise or fall – place a buy or sell position, respectively.
Step 5: Specify your stake per point and confirm the spread betting order at Capital.com!
In the sections below, we explore how the above spread betting shares UK example works in much more detail.
Spread Betting Shares Explained
The main premise with spread betting shares UK is that you need to decide whether you think your chosen stock will increase or decrease in price
You want to trade Tesla shares – which are priced at USD $730.50 at your chosen spread betting broker
You think the share price will increase – so you place a buy order
You enter a stake of £2 per point
Later in the day – Tesla shares are worth USD $732.50
As 1 point equates to 1 cent – this is a price movement of 200 points
On a stake of £2 per point – you made a profit of £400
When using a shares spread betting UK broker – you can always go long or short on your chosen stock. For example, if you felt that Tesla shares were overvalued – you could instead place a short position. This means that you will make a profit if the stock price declines.
What is Shares Spread Betting?
Shares spread betting is a lot different from traditional stock investments. The latter, for example, will see you buy a stock and then keep it in your portfolio for months or years. Along the way, you might collect dividend payments from the respective company.
In the case of spread betting on shares UK – you will be trading on a short-term basis. You might keep a position open for a few days or other instances – a few hours. Either way, you’ll be looking to make small profit margins from ever-changing stock market prices.
In the sections below, we cover the fundamentals of spread betting shares UK in greater detail.
How Does Shares Spread Betting Work?
As noted, the main concept when using a spread betting on shares UK site is to determine whether a stock will rise or fall in value. You do, however, need to have a grasp of the underlying metrics of spread betting – as this works in a different way to conventional financial markets.
Let’s start with ownership.
Spread betting shares UK markets are based on financial derivatives. This means that you trade a spread betting stock – you do not own the underlying asset.
It goes without saying that this means you have no shareholder rights – such as receiving dividends or being able to vote in annual general meetings (AGMs). On the contrary, your spread betting trading platform merely allows you to speculate on the future value of the stock.
Spread Betting Points
Spread betting markets move in points.
Let’s say you are trading a UK-listed stock like Barclays – which is currently priced at 187p
A few hours later─ Barclays stocks are priced at 190p
This is a price movement of 3p – or 3 points
If you had staked £2 per point – that would be a profit of £6
As you can see, in this example, 1 point movement amounts to 1p.
In another example:
Let’s say you are trading a US-listed stock like Apple – which is currently priced at $132.50
The US markets are priced in dollars – so in spread betting, 1 point movement amounts to $0.01
A few hours later─ Apple stocks are priced at 133.40
This is a price movement of 90 cents – or 90 points
If you had staked £2 per point – that would be a profit of £180
You need to check your chosen shares spread betting UK broker to assess how much one point movement amounts to – as this can and will vary.
Spread Betting Stakes
So now that you know that shares spread betting UK markets move in points, we now need to explain how stakes work. In a nutshell, you will be staking an amount for each point movement.
If IBM stocks move by 10 points and you stake £3 per point – that’s a profit or loss of £30.
Or, if AstraZeneca shares move by 100 points and you stake 50p per point – that’s a profit or loss of £50.
Once again, this is why it is important to know how the respective spread betting shares UK is priced. For example, there is a big difference between the market being priced as ‘1 point per 1p movement’ and ‘1 point per £1 movement’. In fact, this difference amounts to a factor of 100x.
We should again make it clear that spread betting shares UK is a short-term form of trading. This is because all markets come with an expiry date. This is what allows the sector to remain free from capital gains tax – as it is viewed as gambling in the eyes of HM Revenue and Customs.
In most cases, day trading platforms hosting spread betting shares markets will offer the following trade durations:
Daily Funded Markets: This market will expire on the same day that you place the spread betting position. Typically, this will close when the respective stock exchange closes.
Quarterly Funded Markets: This market will close in three months’ time. This allows you to place spread betting positions with a longer-term strategy in mind.
When your spread betting on shares UK market does expire – your trade will be closed by the broker. Any profits or losses that you make from the trade will depend on the price that the position was opened and closed at.
Spread Betting Shares vs Investing in Stocks
If you’re wondering what the difference is between shares spread betting and traditional stock investments – check out the bullet points below.
Ownership: As noted above, when you spread bet shares – you do not own the underlying market shares. For this, you would need to buy the shares in the traditional sense via a stock broker.
Stakes: When you buy shares, you will enter a total stake. For example, you might decide to buy £500 worth of Apple shares. In shares spread betting UK – you need to enter your stake per point.
Margin: Most shares spread betting UK brokers allow you to trade on margin. This stands at just 20% – meaning you can trade with five times the amount you have in your account. This is not possible when you buy traditional shares.
Long or Short: You can only go long when you buy shares at a traditional UK broker – meaning you think the stocks will increase in value. Shares spread betting UK sites also allow you to go short – meaning you can profit if the stock price declines.
Duration: In most cases, the longest you can keep a shares spread betting UK position open is three months. When you buy shares in a conventional way – you can keep your investment open for as many years as you wish.
Advantages of Shares Spread Betting
If you’re still sitting on fence as to whether or not shares spread betting UK is right for you – below we discuss the core benefits that might see you make the transition.
Shares Spread Betting Tax
Many inexperienced investors in the UK are unaware of their tax obligations when buying shares. In fact, you will potentially need to pay tax on three fronts.
Stamp Duty: When you purchase shares listed on the London Stock Exchange – you need to pay stamp duty tax. This stands at 0.5%. For example, if you buy £10,000 worth of Vodafone stocks, you’ll pay £50.
Dividends Tax: Every time you receive a dividend, you’ll need to pay a tax. The first £2,000 is tax-exempt each year in the UK – so anything over this figure will be taxed by HMRC.
Capital Gains Tax: If and when you sell your shares at a profit – this will be liable for capital gains tax. For example, if you bought the shares for £2,000 and sold them at £3,000 – tax would be liable on the capital gains of £1,000.
Now, all three of the above tax obligations can be alleviated in their entirety by using a shares spread betting UK broker. This means no stamp duty to enter the market and no dividend or capital gains tax on your profits!
Rising and Falling Markets
As we briefly noted earlier, shares spread betting UK sites allow you to profit from both rising and falling markets. For example, if you think that Babcock shares are overvalued – you simply need to enter a short position.
71.2% of retail investors lose money trading CFDs at this site.
Or, if you think that Royal Mail shares are undervalued, you’ll be placing a long position. This gives you lots of flexibility as you can target profits irrespective of how the wider stock markets are performing.
Leverage of 1:5
UK retail clients can enter spread betting shares positions with leverage of up to 1:5. This means that you can trade with five times the amount you have in your spread betting account.
For example, if you stake £10 per point and your position grows by 7 points – this would ordinarily result in a profit of £70. But, with leverage of 1:5 applied to this shares spread betting UK position – your 370 profit is amplified to £350.
Spread Betting Shares Strategies
In many ways, investing in shares in the traditional way is relatively straightforward. For example, you can have a diversified basket of blue-chip stocks to your portfolio and leave them sitting idle for many years or even decades.
However, as you will be approaching the shares spread betting UK markets on a short-term basis – you’ll need to have a number of strategies at your disposal. This will ensure that you have clear financial goals and most importantly – an entry and exit strategy on each spread betting position you place.
Below we discuss the best spread betting on shares strategies UK for newbies entering this marketplace for the first time.
A popular way to target the shares spread betting UK arena is to focus on earnings reports. This is something that all publicly-listed companies must provide to the general public – which is on a quarterly basis. The earnings report essentially gives us a snap-shot overview of how the company has performed over the past three months.
This will include figures surrounding profits, revenues, debt, and more. Put simply, if the earnings report exceeds market expectations – you might consider entering a long position at your chosen shares spread betting UK broker. On the other hand, if the earnings report does not meet expectations – you’d want to enter a short position.
Another spread betting shares strategy to consider is to look out for company dividend announcements. This is because there is a very strong correlation between the size of the planned dividend yield and the company’s stock price. That is to say – and in theory at least, if the company announces a dividend yield of 2% – the stock price will decline by 2%.
This is because the company is effectively worth 2% less – as it is distributing money to shareholders at 2% of the firm’s current stock price. This means that you can attempt to profit from this by entering a short position at your chosen shares spread betting UK broker once the dividend announcement has been made.
Note: You can view upcoming dividend announcement dates here.
We would also suggest keeping an eye on short-term stock price dips. By this, we mean a stock price decline that is not warranted. Instead, this decline might be an overaction of a recent news development.
For example, when it was announced that the Chinese government would be investigating Alibaba for breaching anti-monopoly laws – its stock price tumbled.
This was based on nothing more than fear and uncertainty.
However, those that spent the time researching and analyzing the fundamentals of Alibaba’s business model and balance sheet would have known that the stock price decline was not warranted.
As such, you could have headed over to your shares spread betting UK platform and entered a long position to capitalize on this.
Best Spread Betting Shares UK Brokers
You’ll need to open an account with a spread betting shares UK broker before you can start trading. Make sure the broker is regulated by the FCA, offers your preferred stock market, and offers competitive fees.
1. Capital.com – Best Shares Spread Betting UK Broker for Beginners
Capital.com is a user-friendly CFD trading and spread betting broker located in the UK. The provider is authorized and regulated by the FCA – so your money is safe at all times. This spread betting broker gives you access to thousands of share markets. In the UK, this covers shares listed on the London Stock Exchange and the Alternative Investment Market.
Overseas, you can access spread betting markets from the US, Mainland Europe, Asia, Australia, and more. Outside of shares, the spread betting department at Capital.com also covers commodities, forex, indices, and ETFs. All spread betting markets – both in the UK and abroad, can be traded commission-free at Capital.com. The minimum deposit at this platform is just £20 and you use a UK debit/credit card or an e-wallet.
2. Pepperstone - Best Spread Betting Shares UK Broker for Seasoned Traders
Pepperstone is another popular spread betting broker that is regulated by the FCA. You can trade heaps of shares here - all on a commission-free basis if you opt for a Standard Account. Alternatively, if you are a seasoned trader - it's worth considering the Razar Account. This will get you the tightest spreads in the industry and a competitive commission of just $3.50 per slide.
You can access spread betting on shares UK markets at Pepperstone via MT4, MT5, or cTrade. This is particularly useful if you want to benefit from automated trading or deploy advanced technical indicators. There is no minimum deposit requirement at Pepperstone and the provider accepts Visa, MasterCard, Paypal, and bank transfers. On top of shares, Pepperstone also offers spread betting instruments on commodities, currencies, indices, and if you're a professional client - cryptocurrencies.
How to Get Started with Shares Spread Betting Tutorial
We are now going to walk you through the process of using a spread betting shares UK platform. This is inclusive of opening an account, depositing funds, and placing your first spread betting position.
Step 1: Join Capital.com
As we discussed above, Capital.com is the best shares spread betting UK broker in the market. To get the ball rolling with this platform - visit the broker's homepage and elect to open an account.
All you need to do here is provide some personal information and contact details. All in all, accounts should take no more than a few minutes to open at Capital.com.
Step 2: Upload ID
You will now be prompted to provide a copy of your government-issued ID (passport or driving license). This is part of the KYC (Know Your Customer) process demanded by the FCA.
Step 3: Deposit Funds
To access the live spread betting shares market - you will need to deposit some funds into your Capital.com account. You can use a debit/credit card or e-wallet to fund your account instantly. When using the aforementioned payment types - the minimum deposit is just £20.
Note: Capital.com also supports bank account deposits - but the minimum increases to £250.
Step 4: Search for Shares
Hover your mouse over the 'Markets' button at the top of the page and click on 'Shares'. You can now find your chosen market by using the filter button. This can be broken down by the location of the market (e.g. UK, US), or the industry the company operates in (e.g.energy, healthcare).
If you already know which shares you want to trade - you can use the search box.
Step 5: Place Spread Betting on Shares Trade
You now need to set up an order.
Buy/Sell: Choose from a buy order if you think the share price will rise. Or, place a sell order you think the share price will decline.
Stake: You need to enter your stake for each point movement. For example, £2.50 per point.
Finally, confirm the order and Capital.com will execute your spread betting position instantly!
Spread Betting Shares Tips
Before we conclude our guide - below we provide some valuable spread betting shares tips that you might want to consider implementing.
Tip 1: Only Trade During Standard Market Hours
In many cases, shares betting brokers UK allow you to trade stocks 24 hours per day. This means that you can spread bet outside of standard market hours.
However, we would suggest avoiding this - as during the evening and weekend volatility is much higher. Additionally, the spreads are also less competitive - meaning that you are paying more to access the market.
Tip 2: Start With a Demo Account
Demo accounts are a great way to learn how shares spread betting UK works without needing to risk any of your capital. This will usually mirror live market conditions - in terms of pricing, volatility, and liquidity.
At Capital.com - you will have access to a free shares spread betting UK account once you register. Stay in demo mode until you feel ready to start trading with real money and you have the correct risk management tools in place.
Tip 3: Stick With Blue-Chip Stocks
It's also a good idea to stick with blue-chip stocks when you first start out in the world of shares spread betting UK. This is because blue-chip stocks are a lot more stable and a lot less volatile.
As such, you'll want to focus on FTSE 100 shares listed on the London Stock Exchange. Similarly, both the New York Stock Exchange and NASDAQ in the US are home to hundreds of established blue-chip companies.
If you're interested in trading stocks on a short-term basis - shares spread betting UK is likely to be of interest. This trading arena comes with leverage of 1:5, the option to go long or short on your chosen stock, and all profits are exempt from tax.
We found that Capital.com is the best broker in the UK that offers a spread betting shares marketplace. You can access over 18 stock exchanges without paying any commissions and the minimum spread betting deposit is just £20.
Capital.com - Best Spread Betting Shares UK Broker with 0% Commission
71.2% of retail investor accounts lose money when trading CFDs with this provider.
What is shares spread betting UK?
When you 'spread bet shares' - you are simply looking to predict whether the stock price increases or decrease in the near future. You won't own the actual shares - as financial spread betting instruments are derivatives.
How much can you make from spread betting shares UK?
There are two key metrics that will determine how much money you can make from a spread betting on shares trade. Firstly, this will depend on the amount you stake per point. Secondly, your profit will be dictated by how many points the shares moved in your direction. For example, if you staked £10 per point and the shares increased by 20 points - that's a profit of £200.
What are the risks of spread betting shares?
The risks involved when you spread bet shares are the same as any other trading sector. That is to say, if you speculate on a stock incorrectly - you will lose money.
Is shares spread betting tax-free?
Yes, in the UK and Ireland, spread betting is tax-free. This means no capital gains tax on your spread betting profits! These favorable tax laws also mean that you won't pay any stamp duty.
How much do you need for spread betting shares UK?
There are two minimums you need to look for when choosing a shares spread betting platform. Firstly, you need to check the minimum deposit. At Capital.com - this is just £20. Secondly, you need to check the minimum stake per point. This is usually just 10p - but do check this before signing up with a broker.
Who regulates spread betting in the UK?
Spread betting brokers in the UK are regulated by the FCA.
What is margin in spread betting?
Margin allows you to enter a spread betting position at a greater amount than you have in your trading account. For example, if you are spread betting shares in the UK - the margin requirement is just 20%. This means that you only need to put up one-fifth of the total stake size.