This is general information, not tax advice. Echelon is not a tax adviser and nothing here takes account of your circumstances. Tax depends on your individual position and the rules change. Echelon recommends you seek professional financial advice before acting on any of this information. Find a financial adviser in your area.
The short version: CFDs are generally subject to capital gains tax. Spread betting generally is not, because HMRC treats it as gambling. That single distinction is the whole subject, and it cuts both ways more than the marketing suggests.
CFD trading tax in the UK
Profits on contracts for difference are normally treated as chargeable gains, so capital gains tax applies. For the 2026 to 2027 tax year the annual exempt amount is £3,000, and gains above it are charged at 18% within the basic income tax band and 24% above it. A higher or additional rate taxpayer pays 24% on gains from 6 April 2026.
The allowance is per person per tax year and it is not carried forward. It has fallen a long way in recent years, so a level of trading that produced no liability a few years ago may now produce one.
Is forex trading tax free in the UK?
It depends entirely on the product, which is why the question has no single answer and why you will see both answers confidently given.
- Spread betting on currency is generally free of capital gains tax, because HMRC treats it as a bet rather than an investment.
- CFDs on currency are generally within the capital gains regime, like any other CFD.
- Buying and selling actual currency, or trading through a foreign entity, has its own treatment again.
The half of that nobody selling spread betting emphasises: if the profits are not taxable, the losses are not deductible either. Spread betting losses cannot be set against other capital gains. CFD losses can be, in the same year or carried forward. For anybody who has a losing year, and most people do, that is not a minor detail.
When trading becomes income rather than gains
In some circumstances HMRC may treat trading activity as a trade in the ordinary sense, in which case profits are subject to income tax and national insurance rather than capital gains tax. This is assessed on the facts using long-established tests, and it is not a status you choose by describing yourself as a full time trader.
It is genuinely uncommon for individuals and it is also the single point where getting it wrong is most expensive. If your trading is substantial, organised and your main source of income, that is a conversation to have with an accountant rather than a forum.
What you have to do about it
- Keep a record of every closed position, with dates and amounts. Your broker's annual statement is the starting point, not the finished job.
- Report gains through Self Assessment if they exceed the reporting thresholds, or use HMRC's real time service where that applies.
- Keep losses recorded even in a year you owe nothing. An unclaimed loss cannot be carried forward, and claiming it has a time limit.
- Keep records for the period HMRC requires, which is longer than most people assume.
Three things that are commonly got wrong
That spread betting is tax free for everyone. It is the general treatment for individuals, but it is not a guarantee, and HMRC looks at the whole picture rather than the product label.
That withdrawing is what triggers tax. It is not. A gain is realised when the position closes, whether or not the money ever leaves the account.
That a broker outside the UK removes the obligation. UK residents are generally taxed on worldwide gains regardless of where the broker sits.
None of the above is advice, and the rates and allowances quoted change. The links below go to HMRC directly, which is where the current position always is.
Written for education, not as advice. Echelon is not authorised to give personal recommendations and nothing here takes account of your circumstances. Trading carries risk and most people who trade lose money. Read the risk disclosure.