As far as I can see Spreadbetting is tax free in the uk, whereas CFD's aren't. If you are a UK resident you can use the spreadbetting tax free whereas if you are a non-uk resident then you need to use the CFD's.
CFDs you pay tax on if you make more money than the capital gains tax allowance but with SB you dont.
Also if you are a US resident you cannot open a SB account and must use CFDs
But I have heard that a CFD account is better than a SB account even though, in theory, they are the same and it is to do with a SB being able to be quoted at any price that suits the company. I may be wrong but with CFDs I dont think they have the same capability.
CFDs effectivly should replicate the real price on the exchange - ask and bid - and you are effectivly trading directly from the exchange - albeit with a non-direct connection which is how the CFD companies get around the minimum funding and stamp duty payments needed by participants to deal directly with the exchange
so at least in theory - the price should be better with CFDs and the platform that you trade with is gonna give you better information
perhaps someone with daily experience of both - which i dont have as i would only trade direct - can comment
I have used CFDs in the past (D4F) and the spread is the same as SB i.e. 5 points on the Dow and .50 on SPX; however unlike SB where the price is often skewed, the price movement does track the YM and ES futures closely.
Saying that, if you can't benefit from the tax advantages of SB then go for direct access - there's no comparison.
the 5% margin can give you hugh exposure, assuming there is the liquidity. A £10,000 investment on a CFD can give you the equivalent of £200,000 in the particular stock on indices. Some CFD firms have minimum amounts you can use often £5-10k.
IG Markets would not let me open an account with £5k, they said I had to have a minmum of £10k.
Also you have to pay commission on CFD's on a £10,000 stake/bet/investment at a 5% margin you would pay 0.25%, which would be £500, plus you have to pay interest on that £200,000 as well which can work out quite a lot.
Finally on CFD's you need to be classed as an intermediate investor, which kind of waves some of your rights when it comes to complaining about losing lots of money down to bad advice or something.
All of the above may be rubbish, just what Im told. But I think with CFD's you can get a much larger exposure to the market than spreadbetting.