Advanced · Lesson 8 of 9 · 7 min read
Spread betting, CFDs and tax
In the UK most people trade with a spread betting or a CFD account. They work in a very similar way, but they are taxed differently. Here is what that means for you.
Two ways to trade the same markets
With spread betting, you choose an amount per point, such as £1 a point on the FTSE. With a CFD (contract for difference), you trade a number of contracts or lots. Both let you go long or short with leverage, and both come with the same FCA leverage limits and protections. Neither means you own the actual asset.
The key differences
| Spread betting | CFDs | |
|---|---|---|
| Trade size | £ per point | Number of contracts or lots |
| Tax on profits | For most people, no Capital Gains Tax or stamp duty | Capital Gains Tax on net gains above the £3,000 yearly allowance |
| Losses | Cannot be used to reduce tax on other gains | Can be set against other gains, or carried forward if reported |
| Reporting | Usually nothing to report | Gains reported through Self Assessment |
| Where available | Mainly the UK and Ireland | Most countries |
For the 2025/26 and 2026/27 tax years, Capital Gains Tax is 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. Spread betting is usually tax-free because HMRC treats it like betting for most people. If trading is your job or main income, HMRC may see it differently.
Tax only matters if you make a profit. A tax-free loss is still a loss, so pick the account that suits how you trade, and check your own situation with HMRC or an accountant. Tax rules can change.
A basic rate taxpayer with no other gains makes £5,000 profit in a year on CFDs. After the £3,000 allowance, £2,000 is taxable: about £360 at 18%, or £480 at 24% for a higher rate taxpayer. The same profit through spread betting would usually be tax-free.
In a losing year it is the other way round: £5,000 of CFD losses could reduce the tax on gains from shares sold that year, while spread betting losses cannot be used at all.
Keep good records
Whichever account you use, keep a record of every trade. For CFDs you need it for your tax return; for both, your journal is how you know whether you are actually making money after costs.
Common mistakes
- Choosing spread betting only for the tax, then trading too much.
- Forgetting to report CFD gains above the allowance.
- Assuming the rules are the same if you live outside the UK.
- Treating this lesson as tax advice for your own situation.
Check yourself
1. Which type of account usually has no Capital Gains Tax on profits for most UK traders?
Spread betting.
2. Which one lets you set losses against other gains?
CFDs.
3. What is the yearly Capital Gains Tax allowance in 2026/27?
£3,000.
Try it on BTM
For education only, not financial advice. Trading carries a high risk of losing money, especially with leverage. Only trade with money you can afford to lose.
For educational purposes only. Nothing here is financial advice. Past performance does not guarantee future results, and trading carries a high risk of losing money, so only trade with money you can afford to lose. Read the risk warning.