For an individual who is not trading, spread betting and contracts for difference (CFDs) can produce the same economic result but opposite tax outcomes. Spread bets are bets, so profits are free of income tax and Capital Gains Tax and losses get no relief. Retail CFDs are financial futures charged to Capital Gains Tax under section 143 of the Taxation of Chargeable Gains Act 1992, so gains are taxed and losses are allowable. Leveraged spot forex is usually a rolling contract that the FCA classes as a future or CFD, and only genuine trading moves any of these into income tax.

Why are spread bets and CFDs taxed differently?

The difference is legal form, not economics. HMRC’s Capital Gains Manual at CG56105 describes financial spread betting as gambling on the future direction of prices or indices and states that, although the terminology echoes the derivatives market, no assets are acquired or disposed of and no chargeable gains or allowable losses arise. For income tax, BIM22015 says a person placing a spread bet is not normally carrying on a trade, so is not taxable on profits and gets no relief for losses. The spread betting firm pays the tax instead: General Betting Duty is charged at 3% on its profits from financial spread bets.

A CFD is a contract with a counterparty, usually an FCA authorised derivatives broker, that pays the difference in value of a share, index or other asset between opening and closing the position. CG56100 states that retail CFDs are financial futures and, unless the profits are trading income, section 143 TCGA charges the outcome under the capital gains regime. Section 143(3) brings in futures contracts entered into with an authorised person otherwise than on an exchange, and section 143(5) treats closing out a contract by entering a reciprocal one as a disposal.

How is a CFD gain or loss calculated?

CG56100 explains that every debit and credit on the position goes into a single capital gains computation when the contract is closed out. That includes:

  • the price movement between opening and closing;
  • commission charged by the broker;
  • financing charges equivalent to interest on long positions, and amounts credited on short positions;
  • dividend equivalents credited on long positions or debited on short positions.

These “interest” and “dividend” amounts are not real interest or dividends. They should not be shown as investment income on a tax return, and financing charges cannot be deducted from other income. The net result is a chargeable gain or an allowable loss.

For 2026 to 2027, net gains above the £3,000 annual exempt amount are taxed at 18% within the basic rate band and 24% above it; see Capital Gains Tax rates. A loss is set against gains of the same year first, and any unused loss carries forward. You can claim a loss up to 4 years after the end of the tax year of the disposal.

How is forex trading taxed?

“Forex trading” covers several different things, and each is taxed differently.

  • Leveraged spot forex with a broker. Most retail platforms offer rolling positions rather than delivery of currency. The FCA Handbook defines a rolling spot forex contract as a future (other than one traded on a recognised investment exchange) for the sale of foreign exchange or sterling, or a CFD referenced to exchange rate movements, entered into for speculation. That brings it into the futures and CFD treatment above: capital gains and allowable losses for a non trader.
  • Forex spread bets. A bet on a currency pair is a spread bet like any other: outside tax, with no loss relief.
  • Buying and holding actual currency. CG78300 confirms that currency other than sterling is a chargeable asset. Section 269 TCGA exempts currency an individual acquires for personal spending outside the UK.
  • Foreign currency bank accounts. CG78321 explains that from 6 April 2012 these are treated as simple debts for individuals, trustees and personal representatives, so they produce no chargeable gains or allowable losses. Interest on them is still taxable.
Activity (non trader) Profits Losses
Financial spread bet Not taxed No relief
Retail CFD Capital Gains Tax Allowable capital loss
Rolling spot forex Treated as future or CFD Treated as future or CFD
Foreign currency bank account No chargeable gain No allowable loss

When does it count as trading?

Rarely, for individuals. BIM56850 sets out HMRC’s view, based on Lewis Emanuel & Son Ltd v White (1965) and Salt v Chamberlain (1979), that an individual’s speculative dealings are presumed not to be a trade unless particular factors take the case “out of the norm”. BIM56880 rejects the argument that derivatives, because they are more sophisticated or produce no income, are more likely to be traded: the same overall test applies as for shares.

BIM56860 summarises three cases:

  • Salt v Chamberlain. About 200 transactions over four years, including options, by a mathematics graduate using computer forecasts: not trading.
  • Wannell v Rothwell (1996). A former commodity futures trader dealing from home through brokers was on the trading side of the line “by a hair’s breadth”, but the activity was not commercial, so his losses could not be set against general income.
  • Manzur v HMRC (2010). A retired surgeon making 240 to 300 trades a year online was managing investments, not trading. Frequency and short holding periods alone did not establish a trade.

BIM56840 warns that the badges of trade are of limited value for financial instruments, because frequent dealing is consistent with investment. For spread bets, BIM22020 says winnings are taxable only where they arise from carrying on a trade, not from an opportunity a trade presents. BIM56900 gives a hedge of a business risk as the example. Companies are different: CFDs, including spread bets, fall within the corporation tax derivative contracts regime in most cases.

How does this work in practice?

Illustration only. Alex is a higher rate taxpayer who is not trading. In 2026 to 2027 Alex closes CFD positions with a net gain of £9,000 after commission, financing charges and dividend adjustments, and makes a £5,000 profit on financial spread bets.

  • CFDs: £9,000 less the £3,000 annual exempt amount leaves £6,000, taxed at 24%: £1,440.
  • Spread bets: the £5,000 is not taxable and is not reported.

Reverse the results, with a £5,000 CFD loss and a £9,000 spread betting profit, and Alex pays nothing on the spread bets but still has a £5,000 allowable loss to use against other gains, now or in later years, provided it is claimed in time.

Does FCA regulation affect the tax position?

No, but it explains how the products behave. Since 1 August 2019 firms selling CFDs to retail clients have had to limit leverage to between 30:1 and 2:1, close out positions when funds fall to 50% of required margin, and protect clients from losing more than the money in their account. Minimum margins under COBS 22.5 depend on the underlying, from 3.33% for a major currency pair to 20% for individual shares. The FCA product rules do not decide whether a contract is a bet or a future for tax; the contract terms do.

What mistakes are common?

  • Claiming spread betting losses. They cannot be set against capital gains or income.
  • Reporting CFD adjustments as income. Dividend and interest equivalents belong in the capital gains computation, not the savings or dividend boxes.
  • Arguing trading status only for loss relief. Wannell shows that even a borderline trade may fail the commerciality test for sideways relief, and HMRC applies the same tests whether the result is a profit or a loss.
  • Missing the claim deadline. CFD losses not claimed within 4 years are lost.
  • Assuming all forex is the same. Check whether you hold currency, a bank balance, a rolling contract or a bet. Crypto derivatives raise further questions; see cryptoasset tax.
  • Treating betting and investing the same way. Ordinary gambling is covered in gambling, betting and lottery winnings.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.