Two UK traders take the same position on gold, at the same size, on the same morning, and close it three hours later for the same £8,000 profit. One keeps all of it. The other pays £1,200 to HMRC. Nothing about the trade was different. One of them opened a spread bet and the other opened a CFD, and in the United Kingdom that single choice is a tax decision dressed up as a platform preference.
Most UK brokers offer both products on the same screen, with the same chart, the same spread and the same overnight financing. The tab you click decides which tax regime you are in for the rest of the year. This guide sets out what each one actually costs, where the tax-free headline stops being true, and the case – which almost nobody makes – for deliberately choosing the taxed product.
This is the tax guide the Trading in the United Kingdom hub points at.
This is not tax advice.
The rates, allowances and treatments below are the position for the 2026/27 UK tax year, drawn from HMRC guidance and the relevant legislation. How they apply turns on facts specific to you, including your other income and whether your activity amounts to a trade. Before you file, speak to an accountant who has handled active-trader returns. Treat this as a map of the terrain, not a substitute for advice on your own situation.
The three-way split, and why it exists
The UK does not tax “trading” as one activity. It asks a prior question: what, legally, did you just do? Three answers, three regimes.
| Product | What HMRC sees | Tax on profit | Stamp duty | Losses |
|---|---|---|---|---|
| Spread bet | A bet | None | None | Not allowable |
| CFD | A chargeable disposal | CGT at 18% or 24% | None | Allowable |
| Shares held directly | Ownership of an asset | CGT at 18% or 24% | 0.5% on purchase | Allowable |
| Anything inside an ISA | A sheltered holding | None | 0.5% still applies on shares | Not allowable |
The logic is older than the products. A spread bet is legally a wager on a price, not a purchase of anything, so HMRC’s position is that no asset is acquired and none is disposed of. No disposal, no chargeable gain. A CFD is a contract whose value derives from an asset, and closing it is a disposal of that contract, which lands squarely inside the capital gains regime. Buying a share is buying a thing, which attracts stamp duty reserve tax on the way in and CGT on the way out.
Read that table once more and notice the column that gets ignored in every advert. The spread bet is the only row with nothing in the tax column and nothing in the loss column. Those two facts are the same fact.
Spread betting: what tax free actually means
For most UK residents, profits from a genuine financial spread bet carry no Capital Gains Tax and no stamp duty, and there is nothing to report on a Self Assessment return. HMRC treats the activity as betting rather than investing, and its Capital Gains Manual states that no assets are acquired or disposed of under a genuine financial spread bet, so no chargeable gains and no allowable losses arise.
That is the cleanest tax outcome available to a UK retail trader. It is also narrower than the marketing suggests, in two specific ways.
First, the trading exception. HMRC can tax betting where it forms part of a trade you already carry on. The risk here is not the salaried person trading their own money in the evening; it is the person whose surrounding financial activity already looks like a business and whose betting is bound up with it. There is no trade count, no profit threshold and no bright line that flips you over. It is a facts-and-circumstances judgement, and it is the one place where a spread better genuinely needs professional advice rather than a forum consensus.
Second, and far more commonly relevant: the losses are gone. Because a spread bet sits outside the capital gains regime entirely, a losing year produces nothing you can use. You cannot offset it against gains on shares, funds or property. You cannot carry it forward. There is no relief of any kind, because there was never a chargeable transaction to relieve.
The asymmetry nobody advertises.
Tax-free on the upside means relief-free on the downside. That is a fair trade for a trader who is consistently profitable, and a poor one for everybody else – and every broker on the market publishes the percentage of its own retail accounts that lose money, because the FCA makes it. Read your broker’s number, then decide which side of the asymmetry you are actually buying.
CFDs: the taxed product, and what the tax buys you
A CFD closed at a profit is a chargeable disposal. Gains above the annual exempt amount are taxed at 18% where they fall inside your remaining basic rate band and 24% above it, the rates that have applied to all non-property gains since 30 October 2024. The annual exempt amount is £3,000 for 2026/27, unchanged from the previous two years, and it covers all your gains combined rather than each asset separately. It cannot be carried forward.
Your gain is stacked on top of your income to decide which rate applies, so a basic-rate earner with a large gain will pay 18% on the part that still fits inside the band and 24% on the rest. No stamp duty arises, because a CFD never transfers ownership of anything.
What the tax buys you is symmetry. A CFD loss is an allowable capital loss. It can be set against capital gains in the same year, and any excess carries forward indefinitely against future gains once it has been reported to HMRC. For a trader who also holds shares, funds or a second property outside a wrapper, that is a genuine asset rather than a consolation.
On reporting: you need to report gains through Self Assessment if your total gains exceed the £3,000 allowance, and also if you are already within Self Assessment and your total disposal proceeds exceed £50,000, even where no tax is due. Gains for the 2026/27 year go on the return due by 31 January 2028.
The same trade, both ways
Illustrative only, using the 2026/27 allowance and rates, ignoring spread and financing costs because both products charge them and neither is taxed on them. Your figures will differ.
| £8,000 profit year | Spread bet | CFD, basic rate | CFD, higher rate |
|---|---|---|---|
| Gain | £8,000 | £8,000 | £8,000 |
| Less allowance | n/a | £3,000 | £3,000 |
| Taxable | £0 | £5,000 | £5,000 |
| Tax | £0 | £900 | £1,200 |
| You keep | £8,000 | £7,100 | £6,800 |
Now run the year most retail accounts actually have.
| £8,000 loss year | Spread bet | CFD |
|---|---|---|
| Relief available | None | £8,000 allowable loss |
| Set against other gains this year | No | Yes |
| Carried forward | No | Yes, once reported |
| Value if you hold other assets | £0 | Up to £1,920 of tax saved at 24% |
The spread bet wins the first table by £900 or £1,200. The CFD wins the second by up to £1,920. Which table describes your year is the entire decision, and it is a question about your trading record rather than about tax.
What the choice does not change
Three things stay identical, and mistaking any of them for a difference is how people choose badly.
The FCA rules. The regulator treats spread bets as CFDs for the purposes of its retail restrictions, so the same limits apply to both: leverage capped between 30:1 and 2:1 depending on the volatility of the underlying, a 50% margin close-out, negative balance protection, no inducements to trade, and a standardised risk warning showing that firm’s own percentage of loss-making retail accounts. Choosing a spread bet does not buy you more rope.
The costs. Both carry a spread, and both charge overnight financing on positions held past the daily cut-off. Neither cost is deductible against anything in the spread-betting case, and in the CFD case they form part of the computation rather than a separate deduction. A tax saving of £900 disappears quickly under financing on a position held for months, which is why the tax tail should not wag the holding-period dog.
The risk. Leverage behaves identically in both. At 30:1 a 3.33% adverse move takes the whole deposit. The tax treatment of a blown account is not an interesting question.
Which one, honestly
The rule of thumb that survives contact with reality:
- Consistently profitable, no other capital gains to shelter: the spread bet is the better product, and the gap is real money every year.
- Still learning, or trading a small account you expect to be volatile: the CFD’s allowable losses are worth more than a tax saving on profits you have not made yet.
- Holding shares, funds or property outside a wrapper: the CFD’s losses can be set against those gains, which is the strongest case for the taxed product and the one most often missed.
- Long-horizon investing rather than trading: neither. Use the ISA or the pension, where the gain is not taxed and the 0.5% stamp duty on shares is the only friction left.
- Prop-firm payouts: a different question again. A payout is a payment for performance under a contract rather than a gain on your own positions, which puts it outside both regimes above and into income territory. Model the real, after-cost number in the prop firm challenge simulator before you compare it with trading your own capital.
Switching between the two mid-year is allowed and common, because they are separate accounts at the same broker. What you cannot do is decide retrospectively. The product you traded is the product you traded, and the tax follows it.
Where this sits in Mind, Method, Money
This is Money, and it is the pillar traders skip because it is not exciting. A 24% rate difference on a profitable year is larger than the edge most retail strategies actually produce, and a £8,000 unusable loss is a bigger hole than most risk rules are designed to prevent. A trader who spends six months refining entries and no time on the wrapper is optimising the small number and ignoring the large one.
There is a behavioural point too. The spread bet’s tax-free headline is sold as a free lunch, and free lunches change how people size positions. Knowing precisely what the choice costs in each direction removes the fantasy, and removing fantasies is most of what risk management is.
If you are still deciding what to trade rather than how it will be taxed, start with the history of the London Stock Exchange and the Mind, Method, Money framework. The tax question follows the instrument, and the instrument should follow the method.
Frequently asked questions
Is spread betting really tax free in the UK?
For most UK residents, yes. HMRC treats a genuine financial spread bet as betting rather than a chargeable disposal, so no Capital Gains Tax and no stamp duty arise and the profits are not reported. Two conditions attach: HMRC can tax betting that forms part of a trade you already carry on, and spread betting losses are not allowable against anything.
How much Capital Gains Tax do I pay on CFD profits?
18% on gains that fall inside your remaining basic rate band and 24% above it, on the amount above the annual exempt amount. That allowance is £3,000 for 2026/27 and covers all your gains combined. Your gain is stacked on top of your income to decide which rate applies to which part.
Can I offset trading losses against my salary?
No. Capital losses from CFDs offset capital gains, not income. Spread betting losses offset nothing at all. A losing trading year does not reduce the tax on your wages in either case.
Do I pay stamp duty on CFDs or spread bets?
No. Stamp duty reserve tax of 0.5% applies to most electronic purchases of UK shares, because ownership transfers. Neither a CFD nor a spread bet transfers ownership, so neither attracts it.
Do I have to report CFD trades if I made a loss?
You should, if you want to use the loss. An allowable capital loss has to be reported to HMRC before it can be set against future gains. Reporting is also required where total gains exceed the £3,000 allowance, or where you are already in Self Assessment and total disposal proceeds exceed £50,000.
Can I trade CFDs or spread bets inside an ISA?
No. ISAs hold investments, not leveraged derivative positions. If your objective is sheltering long-term growth rather than trading, the ISA is the better wrapper and the comparison on this page does not apply to you.
Model it before you choose it.
Size a position properly with the trading calculators, then read the rest of the UK picture – leverage rules, brokers, prop firms and sessions in London time – on the Trading in the United Kingdom hub.
Sources: HMRC guidance on the tax treatment of financial spread bets (Business Income Manual and Capital Gains Manual); Capital Gains Tax rates of 18% and 24% applying to non-property gains from 30 October 2024, with an annual exempt amount of £3,000 for 2026/27; stamp duty reserve tax at 0.5% on electronic purchases of UK shares; FCA Policy Statement PS19/18 on retail CFD restrictions. Figures are illustrative, assume no other gains or losses, and ignore spread and financing costs. Last reviewed 26 September 2026.
Not tax, legal or financial advice. UK tax rules change and their application depends on individual circumstances. Verify rates, thresholds and treatments against HMRC guidance, and take advice from a qualified accountant before acting.
The Complete Trader's Edge
The full Mind · Method · Money framework. 70 chapters.
View on Amazon →
Market Mayhem
400 years of bubbles, crashes, and the pattern that keeps repeating.
Buy on Amazon →
Greatest Companies
How the world's greatest companies were built — and what traders learn from them.
View on Amazon →
Greatest Traders
Eighty-six lives that explain the markets — Livermore to Madoff, told with the losses left in.
View on Amazon →
