CFDs vs buying stocks

Buy company shares through a broker and you pay the full price upfront. Your account can hold those shares for as long as you wish. No expiry date applies, and there's no daily borrowing charge.

A CFD gives you no ownership of the underlying share. You and a broker agree to exchange the price difference between the opening and closing of the trade. Most CFDs use leverage, which means you put down a small deposit while your profit or loss tracks the full trade value.

Back in 2019, the FCA put limits on selling CFDs to retail customers. Retail leverage limits and loss protections stop nearly 400,000 people a year from risking more than their original stake. These rules, the FCA says, offer protection worth between £267m and £451m.

Our FCA-regulated forex brokers directory lists authorised providers, so you can see which firms offer share dealing as well as CFDs.

You usually pay 0.5% in tax on the price when you buy already issued shares in a UK company. The 0.5% government charge is taken automatically on electronic share purchases, and it's called Stamp Duty Reserve Tax. Foreign shares bought outside the UK normally don't carry this tax, though other taxes may apply.

When you compare CFD vs shares costs, a CFD carries no Stamp Duty. The reason is that you never buy the actual share. Instead, your main ongoing cost on a leveraged trade is overnight funding. Overnight funding is a daily fee a broker charges when you keep a leveraged CFD open past the end of the day.

Hold a trade for weeks and daily charges add up fast. Buying shares outright means no overnight funding fee, since you don't borrow from a broker.

You can save tax-free by holding company shares in a stocks and shares ISA. Across all 4 types of ISA, the most you can save in the 2026 to 2027 tax year is £20,000. To open an ISA, you must be 18 or over and a UK resident. Opening a Lifetime ISA also means you must be under 40.

CFDs aren't eligible for an ISA, because the underlying asset isn't yours. Selling can trigger Capital Gains Tax on both CFD profits and share gains outside an ISA.

Tax applies only to overall gains that exceed your £3,000 annual allowance, or £1,500 for trusts. We cover on the CFD tax in the UK page how you can deduct losses and lower your bill.

CFDs carry a much higher risk of quick losses because leverage magnifies every price move against you. The FCA warns that substantial losses are a considerable risk with CFDs, which are complex products. Share prices can go down as well as up too, yet a small dip won't wipe out an unleveraged account.

Retail accounts come with leverage limits, client loss protections and segregated client money accounts. Some firms push retail traders to state that they're professional clients. This removes your loss cap and may take your cash out of segregated accounts. Around £75m was also lost by over 90,000 people across a 4-year period at one unregulated firm promoted online.

Money you can't get back from an FCA-authorised firm that fails after 1 Apr 2019 is covered by the FSCS, up to £85,000 for each person, per firm. Poor investment performance or losing trades never lead to a payout from the FSCS.