Forex trading tax in the UK

The type of contract you trade determines whether you pay tax, rather than the currency pair shown on your screen. HMRC gives each product type its own forex tax UK treatment.

In a spread bet, you bet on whether a currency price rises or falls, gaining or losing a fixed stake for every point it moves. BIM22015 of HMRC Business Income Manual classifies spread betting as betting rather than trading, so profits remain untaxed and losses offer no relief.

A contract for difference (CFD) through a broker settles the cash price difference between a trade's opening and closing, without you buying the currency itself. Retail CFDs are taxed as financial futures under section CG56100 of the HMRC Capital Gains Manual, meaning Capital Gains Tax applies unless your profits count as business trading income. Disposals of foreign currency other than sterling also fall under Capital Gains Tax through CG78300.

Under manual BIM20205, HMRC treats profits as trading income only in rare cases when your trading operates like a commercial business.

Both spread betting and CFD account types are available from many FCA-regulated firms. Forex CFDs and spread betting are available from some register-listed brokers, including ActivTrades, Capital.com, CMC Markets, FxPro, IG, Pepperstone, Spreadex and Vantage. Forex CFDs are offered without any spread betting account by some firms, including eToro and XTB.

Only net gains above your yearly tax-free allowance fall within Capital Gains Tax. The annual exempt amount is the total profit you can make from all taxable assets during one tax year before Capital Gains Tax applies.

For 2026 to 2027, the annual exempt amount is £3,000 for individuals and £1,500 for most trustees. You pay forex tax of 18% or 24% on gains above £3,000, and your total taxable income for the year determines the rate. Start by calculating your total taxable income to determine which rate applies.

You must deposit margin when opening a CFD. HMRC states in CG56100 that margin is usually 20% of the underlying asset's value and ranges from about 5% to 35%. After you close the contract, HMRC counts every account debit and credit in your Capital Gains Tax calculation. These amounts cover broker commission, daily financing charges or credits that reflect interest, and adjustments that reflect company dividends. HMRC states in CG56100 that financing and dividend adjustments aren't true interest or dividends, so don't report them as investment income.

An allowable loss is a taxable-asset loss that you report to HMRC, which you can subtract from your chargeable gains. Under the CFD tax UK rules, gains from the same tax year offset your reported losses before any other gains. Unused losses carried forward from earlier tax years can be deducted if your net gains remain above £3,000. You don't need to report a loss immediately, since claims may be made for up to 4 years after the tax year in which you closed the trade ends.

Yes. On forex spread betting profits, almost every individual UK trader pays neither Capital Gains Tax nor Income Tax. According to Business Income Manual, BIM22015, HMRC doesn't treat betting and gambling as trading.

The manual states that a spread bet placer normally isn't carrying on a trade, pays no tax on profits and receives no relief for losses." Instead, the bookmaker organizing the spread bet pays tax on its business profits.

HMRC sets out a narrow exception in manual BIM22020. You pay tax on spread betting wins only when they arise from carrying on a trade, not merely from an opportunity a trade creates. HMRC assesses the economic substance of what's done along with the contract's terms.

Spread betting losses aren't allowable losses, so you can't use them to reduce capital gains from shares, property or CFD accounts. Further detail on how HMRC handles betting accounts appears on our is spread betting tax-free page and our spread betting tax UK page.

Manual CG56100 states that HMRC taxes retail CFDs under the Capital Gains Tax regime in almost every case, unless the profits are taxable trading income. Frequently trading forex at home doesn't alone make a private individual a taxable business.

HMRC and the courts assess whether an activity is a commercial trade by considering the badges of trade summarised in Business Income Manual section BIM20205. Aiming for a profit suggests trading, but this badge alone doesn't decide the question. Systematic, repeated transactions and a short period between opening and closing positions also support a finding of trading, although no single badge settles the issue.

Other badges in BIM20205 concern the activity's fit with an existing business, how it is financed and the pattern of sales compared with that typical of trading firms. The courts decide whether a trade exists based on their overall impression after reviewing all the badges together.

The UK tax year begins on 6 April and closes on 5 April. During that tax year, disposing of contracts or currency means you must file a Self Assessment tax return when Capital Gains Tax was due. As a self-employed sole trader, you must also send a return if you earn more than £1,000 before deducting expenses.

Follow these steps to report your trading results and keep the records HMRC expects:

1. You must register for Self Assessment. Once the tax year ends, tell HMRC by 5 October if you need a return and haven't filed one before.
2. Download annual and monthly account statements from your broker for the full tax year, from 6 April to 5 April.
3. For each closed CFD position, record the commission, closing balance, financing interest charges or credits, dividend adjustments, opening deposit, and price gain or loss. Under CG56100 and CG56101, all of those items count toward your net gain or loss.
4. Claim allowable losses and report net gains in your tax return, or write to HMRC within 4 years after the tax year ends if you've never made a gain and aren't registered for Self Assessment.

These UK tax rules are general information, not personal advice about your situation.