Spread Betting, CFDs and Forex: How HMRC Taxes Each One in 2026/27

A practical guide for self-employed clients, contractors and active traders.

Over the last couple of tax years, we have fielded more questions about active trading than at any point we can remember. Some of it is the after-effect of the pandemic-era boom in retail platforms; some of it is clients who have moved from PAYE into self-employment and now have surplus cash they want to put to work. Whatever the route in, the same three products keep coming up: spread betting, contracts for difference (CFDs) and spot forex.

The thing that catches most people out is that the United Kingdom taxes the three of them in completely different ways. One is tax-free. One is a capital gain. One sits awkwardly between the two depending on how you do it. Before we go through each, it is worth flagging that the scale of UK CFD activity is significant — research by The Investors Centre shows that the major UK-regulated brokers each disclose that between 71% and 79% of their retail clients lose money, and that average revenue per active client at one major broker exceeded £4,600 in the last full reporting year. That context matters because it shapes how HMRC views the activity, and it shapes how we advise clients to keep records.

For clients who have already decided forex is the vehicle they want to use, we generally start by sending them to compare FCA-regulated UK forex brokers so they can pick a firm that publishes its retail loss-rate disclosures and segregates client money properly. From there, the tax position depends entirely on the product they choose. The table below sets out the headline differences; the sections that follow explain each in detail.

Table 1 — At-a-glance: how each product is taxed in 2026/27

1. Spread betting — tax-free, with a caveat

Profits from financial spread betting are exempt from both Income Tax and Capital Gains Tax in the United Kingdom. The exemption sits in Section 51 of the Taxation of Chargeable Gains Act 1992, which excludes “winnings from betting, including pool betting, or lotteries, or games with prizes” from CGT, and is reinforced by HMRC’s longstanding position that financial spread bets are betting transactions for tax purposes.

That position is set out clearly in HMRC’s Business Income Manual at BIM22017, which confirms that the fact a taxpayer has “organised himself in a businesslike way” to place bets does not, by itself, turn betting into a trade. The case law backing this up — Graham v Green (1925) and Down v Compston (1937) — is over ninety years old and has never been seriously challenged.

Two practical points for clients:

• Losses are not deductible. If your spread bet account loses £10,000 in a tax year, that loss cannot be offset against employment income, self-employment profits or capital gains elsewhere. The mirror image of “tax-free wins” is “non-deductible losses.”
• The tax-free status holds even if it is your only income. We occasionally see clients worry that going full-time will trigger income tax treatment. HMRC’s published position is that it does not — but in genuinely full-time cases we would recommend a formal review before relying on the exemption, because if the activity ever did fall within the trading definition, the change in treatment would be retrospective.

Spread betting also carries no stamp duty (you do not own the underlying asset) and the position is closed in sterling, so there are no foreign-exchange complications on the gain.

2. CFDs — capital gains, with the new rates

Contracts for Difference are taxed under the Capital Gains Tax regime. Each closed contract is a disposal; the gain or loss is the difference between the open and close price, in sterling, net of broker charges and financing costs.

The October 2024 Budget made a significant change here: from 30 October 2024 onwards, the CGT rates on non-property assets (including CFDs) were aligned upward with the residential property rates. The numbers for 2026/27 are set out below.

Table 2 — Capital Gains Tax: rates and allowances, 2026/27

Loss relief: CFD losses can be offset against other capital gains in the same tax year. Unused losses are carried forward indefinitely against future gains, provided they are claimed within four years of the end of the tax year in which they arose (TMA 1970 s.43).

No stamp duty: As with spread bets, there is no ownership of the underlying — so no Stamp Duty Reserve Tax on share CFDs.

Where it gets fiddly is the share-matching rules. Section 104 holdings and the 30-day “bed and breakfasting” rule apply to CFDs over UK shares in the same way as they do to physical shareholdings. Clients who close and re-open similar positions within 30 days routinely get this wrong; we tend to recommend a third-party reporting tool rather than trying to reconstruct it by hand at year end.

3. Spot forex — usually CGT, sometimes income

Direct currency trading sits in a slightly awkward space. The default treatment for a UK resident individual trading spot forex through a broker is Capital Gains Tax, on the same basis as CFDs. Two carve-outs are worth knowing:

• Personal use exemption. Foreign currency held for personal use — typically holiday money — is exempt from CGT under TCGA 1992 s.269. This does not extend to a meaningful balance held on a trading platform; HMRC will look at intent.
• The badges of trade test. Where the activity is sufficiently organised, frequent and profit-seeking, HMRC may treat it as a trade — in which case profits are subject to Income Tax and Class 2/4 National Insurance rather than CGT. In practice the bar is high; most retail forex traders do not clear it, but a client who has given up other employment to trade full-time, with thousands of transactions a year, often will.

If trade status applies, losses can be offset against other income (a meaningful benefit relative to CGT treatment), but profits are taxed at the marginal rate — up to 47% once additional-rate income tax and Class 4 NIC combine. The factors HMRC weighs are summarised below.

Table 3 — The badges of trade (HMRC BIM20205 onwards)

4. When a limited company makes sense

For clients who clearly qualify as carrying on a trade, we sometimes look at incorporation. Trading profits inside a Ltd are subject to Corporation Tax at 19% (small profits rate, profits below £50,000), tapering up to 25% on profits above £250,000, with marginal relief between the two thresholds.

That is typically more efficient than personal trading at higher-rate income tax, but the saving has to be weighed against:

• The cost of extracting profits (dividend tax at 8.75%, 33.75% or 39.35% after the £500 dividend allowance)
• Loss of the personal CGT allowance and 18% / 24% rates
• Administrative costs of a Ltd structure
• The fact that spread bet winnings inside a company are not tax-free — the betting exemption is a personal-tax provision, so corporate spread betting falls outside it.

This last point catches people out regularly. If a client wants to use the tax-free spread betting wrapper, they need to be doing it personally, not via their company.

5. A note on ISAs and SIPPs

For completeness — none of these three products can be held inside a Stocks & Shares ISA or a SIPP. ISA-eligible investments are restricted by regulation (broadly: listed shares, funds, gilts and corporate bonds) and exclude derivatives, spread bets and direct currency. A SIPP can in principle hold a wider range of assets, but most retail SIPP providers do not offer CFDs or spread bets, and the FCA’s 2024 review of SIPP investments has further narrowed the operational appetite among providers.

6. What HMRC will want to see in your records

Whichever product is involved, we ask clients trading in any volume to keep:

• A full trade ledger — date, instrument, quantity, open and close price in GBP, charges
• Broker statements covering every reporting period in the tax year
• A note of the underlying purpose where positions look anomalous — for example hedging an FX exposure on a business contract

Retention periods differ by taxpayer type. The table below sets out the legal minimums; in practice we recommend keeping records for at least 12 months beyond those windows to cover enquiry windows that have been extended.

Table 4 — Statutory record-keeping windows

If the activity is being run as a trade rather than as casual speculation, a profit-and-loss account on an accruals basis is also worth keeping from the outset — it makes the eventual self-assessment or corporation tax return far easier to defend.

If you are trading actively — talk to us before year-end

If you are a client of ours and you have started trading actively over the last twelve months — particularly across more than one of these three products — please get in touch before the tax year-end review. The treatment differences are large enough that getting the structure right at the start of the year is materially better than reconstructing it at the deadline.

This article is intended as general guidance for the 2026/27 tax year and does not constitute tax advice. Individual circumstances vary; please contact us directly before acting on any of the points raised.