Caramel is made with sugar, cream or milk and butter. Toffee is made with sugar and butter.
While both are tasty confectionery delights, there are some essential differences between caramel and toffee. Both of these treats are eaten alone or used in a variety of dessert and candy recipes. For instance, caramel can be allowed to set up until it reaches a firm yet gummy texture or poured while still liquid onto ice cream and cake. When firmed up, it is sliced into pieces and dusted lightly with flour or confectioner's sugar to eat as a candy.
Toffee is different from caramel in that it is hard and crunchy, due to a lack of milk or cream. Toffee can also be allowed to cool and set until it hardens. The finished toffee is broken into large pieces to eat as a candy, or smaller pieces to use as a sprinkle or mix-in. Bakers may also choose to sprinkle chocolate or nuts onto hot toffee before it sets. This turns the toffee into a rich, decadent candy.
Both caramel and toffee are made from burnt sugar, but each is cooked at different temperatures. Caramel is cooked at a lower temperature, about 248 degrees Fahrenheit, while toffee is heated up to about 300 F.