Spread Betting vs CFDs: How Each Is Taxed in the UK

If you trade forex, indices or shares with a UK broker, you'll almost certainly do it through one of two products: a contract for difference (CFD) or a spread bet. On screen they look almost identical. You pick a market, choose a direction, and use leverage to control a larger position than your deposit.

For tax purposes, though, HMRC treats them completely differently. A profitable CFD trade can be subject to Capital Gains Tax at up to 24%. The same profit made through a spread bet is normally tax-free. That sounds like an easy choice, but the rules cut both ways, and in a losing year the "tax-free" option can leave you worse off.

This guide explains how each product is taxed in the 2026/27 tax year, works through real numbers, and covers the rare cases where HMRC might treat trading as income rather than capital.

Why the product, not the market, decides the tax

Whether you trade EUR/USD or the FTSE 100 makes no difference to your tax bill. What matters is the legal form of the contract you hold.

HMRC's Capital Gains Manual classes retail CFDs as financial futures. Unless your activity amounts to a trade, their profits and losses fall under Capital Gains Tax. Spread bets are treated as bets, and HMRC's manual states plainly that no chargeable gains or allowable losses arise from spread betting.

Many brokers also offer "rolling spot" forex accounts. These are generally taxed the same way as CFDs, but check your account documents and confirm with an accountant if you're unsure which product you hold. This guide to how spread betting and CFD accounts differ explains the practical differences in more detail.

How CFD profits are taxed

Each closed CFD position produces a gain or a loss. Commission, overnight funding charges and dividend adjustments are all included in that figure. They aren't treated as separate interest or dividend income.

To work out what you owe for the tax year (6 April to 5 April):

1. Add up the gains and losses on all positions closed during the year.
2. Deduct any unused losses brought forward from earlier years.
3. Deduct the £3,000 annual exempt amount.
4. Add what's left on top of your taxable income.

Any part that falls within your basic-rate Income Tax band is taxed at 18%. Anything above it is taxed at 24%. The £3,000 allowance can't be carried forward, so it's lost if you don't use it. For more on how the allowance and rates work across all assets, see our guide to Capital Gains Tax in 2026.

If your taxable gains are above the allowance, you must report and pay the tax yourself; HMRC won't send a bill. Most traders do this on the Capital Gains pages of their Self Assessment return. If you don't otherwise file a return, you may be able to use HMRC's real-time Capital Gains Tax service instead, by 31 December after the tax year ends.

Self Assessment filers also have a separate reporting trigger: gains must be reported if total disposal proceeds exceed £50,000, even when no tax is due. How "proceeds" apply to leveraged CFDs isn't intuitive, so active traders should check this with an accountant.

Why spread betting is tax-free

HMRC's position rests on a long-standing principle from a 1925 court case: betting is not trading. Its Business Income Manual says someone placing a spread bet isn't normally carrying on a trade. Their profits aren't taxed, and they get no relief for their losses.

In practice, that means no Capital Gains Tax, no Income Tax, and nothing to enter on your tax return. Neither spread bets nor CFDs attract stamp duty either, because you never own the underlying shares.

There is a narrow exception. Spread betting wins can become taxable where they arise from carrying on a trade, for example a business using spread bets as part of its operations (BIM22020). That rarely applies to private individuals. Bear in mind too that the tax-free status reflects current law and HMRC practice, both of which can change.

The catch: losses work differently too

Because HMRC doesn't treat a spread bet as an asset, a spread betting loss isn't an "allowable loss". It can't reduce tax on other gains, and it can't be carried forward.

CFD losses, by contrast, can be offset against gains in the same tax year. Any excess can be carried forward to future years, as long as you claim it within four years of the end of the tax year in which you made it.

This matters more than it might seem. Brokers' own regulatory risk warnings show that most retail CFD and spread betting accounts lose money, so a losing year is a realistic scenario.

Example. Alex is a higher-rate taxpayer. This year he sold some shares held outside an ISA for a £5,000 gain. His trading account lost £5,000.

• If he traded CFDs: the £5,000 loss cancels out the £5,000 share gain. Net gain £0, so no Capital Gains Tax.
• If he spread bet: the loss is ignored. His share gain is taxed as normal: (£5,000 − £3,000) × 24% = £480.

Side by side: four scenarios

All figures assume a higher-rate taxpayer, 2026/27 rates, and no losses brought forward from earlier years.

The pattern is simple. Spread betting gives the better tax result in a profitable year, while CFDs give the better result in a losing one. Nobody knows in advance which kind of year they'll have, so tax is only one factor alongside costs, platform features and the markets each account offers.

Could HMRC treat your trading as income?

For most people, no. HMRC's Statement of Practice 3/02 says an individual is unlikely to be regarded as trading as a result of purely speculative transactions in financial futures or options.

Whether someone is trading is still a question of fact, though. HMRC looks at the whole picture: how often you trade, how organised the activity is, and whether it's effectively your living. If your CFD activity were treated as a trade, profits would be subject to Income Tax rather than Capital Gains Tax, with different rules for losses and expenses. If trading is your main source of income, it's worth getting professional advice.

Records worth keeping

Whichever product you use, good records make tax time far easier:

• Your broker's annual tax statement or closed-trade report, with profits and losses in sterling
• Commission, overnight funding and any other charges
• Details of any losses you've claimed and carried forward, with the tax year of each
• Records of other gains in the same year, such as shares sold outside an ISA

For a broader look at classification, record-keeping and Self Assessment for currency traders, see our guide to forex trading tax obligations for UK traders.

Important information

This article is for general information only and isn't financial or tax advice. Tax treatment depends on your individual circumstances and may change in future, so consider speaking to a qualified tax adviser about your own situation. Spread bets and CFDs are complex, leveraged products and carry a high risk of losing money rapidly. You can lose more than your initial deposit on a single position, and most retail accounts lose money.