Profits from CFD trading in the UK are subject to Capital Gains Tax at either 18% or 24%, depending on where your income sits within the tax bands. HMRC treats closing a Contract for Difference as disposing of a chargeable asset, so every profitable trade you close feeds into your total taxable gains for the year. You get a £3,000 tax-free allowance, and only the net gains above that figure are taxed.
One boundary to note upfront: this applies to retail traders treated as investors. If HMRC judges your activity to be a trade in itself, because it’s your main income and you operate with the frequency and sophistication of a financial business, profits can be taxed as income at higher rates instead. For most people trading CFDs alongside a job or other income, Capital Gains Tax is the right regime.
The Rates You’ll Pay on CFD Gains
For gains realised from 6 April 2025 onwards, CFDs fall under the non-property CGT rates:
- 18% for basic rate taxpayers
- 24% for higher or additional rate taxpayers
Which rate applies depends on where your total taxable income plus your gains fall relative to the basic rate band. Add your net gains (after the annual allowance) to your taxable income. Anything still within the basic rate band is taxed at 18%; anything above it is taxed at 24%.1GOV.UK. Capital Gains Tax: Rates
A basic rate taxpayer with a large enough gain can end up paying both rates on different portions. If £10,000 of headroom remains in your basic rate band and you realise £15,000 of taxable gains, the first £10,000 is taxed at 18% and the remaining £5,000 at 24%.
The £3,000 Annual Tax-Free Allowance
Every individual has an Annual Exempt Amount, currently £3,000 for the 2025–26 and 2026–27 tax years.2GOV.UK. Capital Gains Tax Rates and Allowances Gains below that figure attract no tax; only the excess is taxable.
This allowance has fallen sharply. It was £12,300 in 2022–23, £6,000 in 2023–24, and £3,000 from 2024–25 onwards. More casual traders now fall inside the tax net than a few years ago.
The allowance is use-it-or-lose-it each year and cannot be carried forward. Couples each have their own £3,000 but cannot pool or transfer it. It applies to your combined gains across all chargeable assets, not to CFDs alone.
Working Out the Gain on Each Trade
Start with the opening and closing price of every CFD position from your broker’s trade history or contract notes. The gain or loss is the price difference multiplied by your position size.
If the underlying was priced in a foreign currency, convert both the opening and closing values to sterling using the exchange rate on the date of each transaction. HMRC expects the rate applicable on the day the trade was closed, not an average.
Costs You Can Deduct
Several costs reduce your taxable gain:
- Commissions charged to open and close positions.
- Overnight financing charges (swap fees) for holding leveraged positions past the daily cutoff.
- Spread costs are already reflected in your entry and exit prices, so no separate adjustment is needed.
Overnight financing accumulates quietly. A position held for weeks or months can build significant financing costs, and failing to deduct them means overstating your gain. Broker statements should itemise these charges; if they don’t, ask for a breakdown before filing.
Bringing It Together
Add up all your individual trade gains and losses across the tax year, which runs from 6 April to 5 April. Net them against each other to reach your total position from CFDs, then combine with gains or losses from other chargeable assets. The £3,000 allowance is deducted from the combined total, not from each asset class separately.
Using Losses to Cut the Bill
CFD losses are allowable losses that offset your capital gains directly. Lose £8,000 on CFDs and make £12,000 on shares, and your net gain is £4,000. After the £3,000 allowance, only £1,000 is taxable.
When losses in a year exceed gains, the excess carries forward indefinitely and can be applied against gains in future years until used up.3GOV.UK. Capital Gains Tax: Losses An ordering rule matters here: current-year losses must be applied in full first, even if this wastes some of your annual allowance. Carried-forward losses only need to be used to bring your gain down to the allowance, so the rest is preserved for later.
You have four years from the end of the tax year in which a loss occurred to report it to HMRC.3GOV.UK. Capital Gains Tax: Losses Miss that window and the loss is gone. A common mistake is skipping the return in a losing year, then realising later those losses could have offset a profitable one. Report every loss, even when there are no gains to offset against yet.
Reporting Through Self Assessment
Most CFD traders report gains and losses through Self Assessment by completing the Capital Gains summary pages of the tax return. You enter total disposal proceeds and total allowable costs, and HMRC calculates the liability.
When You Have to Report
You must report capital gains if your total gains before losses exceed the £3,000 annual exempt amount, or if your total disposal proceeds exceed £50,000 even when gains are below the threshold. You also need to file if you want to claim an allowable loss.
Deadlines
For each tax year ending 5 April:
- Paper returns are due by 31 October following the end of the tax year.
- Online returns are due by 31 January following the end of the tax year.
- Any tax owed is also due by 31 January.
Gains realised in 2025–26 must be reported online by 31 January 2027, with payment due the same day.4GOV.UK. Self Assessment Tax Returns: Deadlines
Late Filing Penalties
Missing the deadline triggers an automatic £100 penalty, even when no tax is due. The penalties then escalate:
- Up to 3 months late: £100 fixed penalty.
- 3 to 6 months late: £10 per day, up to £900.
- 6 months late: 5% of the tax due or £300, whichever is greater.
- 12 months late: another 5% of the tax due or £300, whichever is greater.
A return a full year overdue can cost over £1,600 in penalties, on top of interest on any unpaid tax.5GOV.UK. Self Assessment Tax Returns: Penalties
Records You Need to Keep
HMRC requires records supporting your Self Assessment return to be kept for at least one year after the filing deadline. For capital gains the practical requirement often runs longer, because you may need records from the date you acquired an asset to calculate the gain on disposal.6GOV.UK. Capital Gains Tax: Record Keeping
For CFDs, keep broker statements, contract notes, overnight financing summaries, and currency conversion records. If you’re carrying losses forward, hold the records supporting those losses until they’re fully used, which can be many years. If HMRC opens a compliance check, everything needs to stay until the check is resolved.
How Spread Betting Differs
Spread betting on the same markets produces economically similar outcomes but is treated very differently. HMRC classifies spread betting profits as gambling winnings, currently exempt from both Capital Gains Tax and Income Tax for most individuals. CFDs are financial instruments and fully taxable.
The flip side is that spread betting losses cannot be offset against other gains, because they aren’t allowable losses. Consistently profitable traders benefit from spread betting’s tax-free status; traders with mixed results across different activities can at least use CFD losses to reduce tax elsewhere. Some people use both instruments for that reason, but the choice between them should turn on trading costs and execution quality rather than tax treatment alone.