CFDs and Spread Bets — How Are They Taxed in the UK?

CFDs and spread bets both let you speculate on price movements without owning the underlying asset. They look similar from a trading perspective. But HMRC treats them completely differently — and getting confused between the two can cost you money or, worse, trigger an unexpected tax bill.

Spread betting — tax-free (with caveats)

Profits from spread betting are not subject to CGT or income tax for most people. HMRC classifies spread bets as gambling, and gambling winnings are tax-free in the UK. This is confirmed in HMRC’s Business Income Manual.

The trade-off: losses from spread betting can’t be used to offset gains from other investments either. If you lose £5,000 spread betting, you can’t set that against a £5,000 gain on shares.

The major caveat: if HMRC determines that spread betting is your main source of income or constitutes a trade, it could be reclassified as taxable business income. This is rare for casual or part-time traders, but full-time spread bettors should take advice. The BIM22017 guidance discusses when gambling can become trading.

CFDs — subject to Capital Gains Tax

Contracts for Difference are chargeable assets. When you close a CFD position at a profit, you owe CGT on the gain. Losses are allowable and can offset other gains. The normal CGT rates apply — 18% basic, 24% higher.

The share matching rules technically apply to CFDs, though in practice most CFD positions are opened and closed the same day, making the matching straightforward. Your disposal proceeds are the closing value, your cost is the opening value, and the gain or loss is the difference.

Report CFD gains on your SA108 in the “Other property, assets and gains” section (Boxes 14-22) — the same section as options.

The trader vs investor question

This applies to both CFDs and share trading generally. If you trade very frequently — daily, with leverage, as your main activity — HMRC may argue you’re carrying on a trade. In that case, profits become business income subject to income tax (up to 45%) rather than CGT (up to 24%).

There’s no bright-line test. HMRC looks at factors like frequency, volume, holding period, whether it’s your primary income, and whether you trade systematically. The Capital Gains Manual CG56100 and the well-known Marson v Morton case set out the factors courts consider.

Most casual investors — even active ones with multiple trades per week — are treated as investors, not traders. But if you’re trading full-time from home as your sole income, it’s worth getting professional advice on your classification.

Leverage and CGT

CFDs and spread bets both use leverage, meaning your gain or loss is amplified relative to your initial deposit. For CGT purposes on CFDs, the gain is calculated on the actual profit — not the leveraged notional amount. If you put down £1,000 margin on a £10,000 CFD position and make £500, the CGT gain is £500.

Which platforms offer which?

For standard share and option CGT calculations, use TaxBull. CFD-specific reporting may need your broker’s P&L statement alongside your share calculations.

This is general information only. The boundary between trading and investing is fact-specific and can have significant tax consequences. Seek professional advice if your trading activity is substantial.