CFD tax in the UK

For retail contracts for differences, HM Revenue and Customs applies Capital Gains Tax instead of income tax. With a contract for differences, you agree with a broker to settle the cash price change rather than own the asset. Since you never buy the underlying shares, Stamp Duty Reserve Tax doesn't apply to you.

Under manual CG56100, HMRC confirms the rule: in almost every case TCGA92/S143 brings the outcomes into the capital gains regime. The only exception applies when statement of practice SP03/02 treats your activity as trading income.

While a trade stays open, your broker applies commission, financing charges and dividend adjustments. These amounts aren't real interest or company dividends, says manual CG56100. Your tax return shouldn't show these amounts as investment income. Closing the contract puts every credit and debit into 1 combined figure showing a gain or a loss.

The example in HMRC manual CG56101 covers a trade of 3 months over 20,000 shares, opened at £5 for each share. The trader's deposit of £20,000 equals 20% of the position value of £100,000.

Tax is due only when your net gains for the tax year go above your annual exempt amount. Each year, you receive this tax-free allowance before owing Capital Gains Tax. It is known as the annual exempt amount. In the UK, the tax year starts on 6 April and ends on 5 April of the following year.

For 2026 to 2027, individuals get an allowance of £3,000, while most trusts get £1,500. Claiming the regime for foreign income and gains, or Overseas Workday Relief, means you don't get this £3,000 allowance.

After your net gains go beyond £3,000, the rate you pay depends on your total taxable income. On gains from contracts for differences, individuals pay 18% or 24%, and trustees and personal representatives pay 24%.

For Capital Gains Tax, losses on a closed contract for differences count as allowable losses. An allowable loss is one you report to HMRC, which lets you take it off your taxable gains. Regular CFD losses can't be deducted from your salary or any other general income.

Report a loss and you set it against capital gains made in that same tax year. That covers gains from shares in companies, property or forex trading. You can deduct losses carried forward from earlier tax years if the net gains are still above £3,000.

Brought-forward losses only have to bring the current gain to the £3,000 tax-free allowance. Whatever loss is left carries forward into future tax years.

A loss doesn't have to be reported straight away. You have up to 4 years to claim, starting from the end of the tax year when you closed the trade. Make the claim through your Self Assessment tax return, or write to HMRC when you have no Self Assessment registration.

You won't get an automatic Capital Gains Tax bill from HMRC. You need to work out whether your total gains go above your £3,000 allowance. Once 5 April passes and the tax year ends, we follow 3 steps to check what needs reporting:

1. For every contract you closed during the tax year, work out the gain or loss, along with any other assets you sold.
2. Total up your gains for the tax year, then take off any allowable losses from that same year.
3. Once you've deducted unused losses from earlier years, check whether the remaining gain goes over your £3,000 allowance.

A taxable gain over £3,000 requires you to report and pay during the next tax year. A Self Assessment return is one option. The other is HMRC's service for real time Capital Gains Tax reporting, which you can use by 31 December following the tax year.

Even if your net gain is below £3,000, you may still have to report. Registered for Self Assessment? Reporting is required whenever your total disposal proceeds in a tax year exceed £50,000. The £50,000 rule has applied since the 2023 to 2024 tax year.

What separates CFD tax from UK spread betting tax is the category HMRC puts each product in. A contract for differences is taxed by HMRC as a financial future under manual CG56100, whereas a spread bet counts as gambling.

According to Business Income Manual BIM22015, HMRC notes that placing a spread bet normally doesn't count as carrying on a trade. As Manual BIM22015 puts it, "They are not taxable on the profits" and receive no relief for their losses." Look at spread betting next to CFDs. Spread bet gains come out free of Capital Gains Tax, while losses on CFDs can offset other capital gains.

You can find CFDs and spread betting together at FCA-regulated brokers such as ActivTrades, Capital.com, CMC Markets, FxPro, IG, Pepperstone, Spreadex and Vantage. CFDs without spread betting are offered by other UK brokers, including eToro, Plus500, Trading 212 and XTB.

This covers the tax rules in general terms, and isn't tax advice.