The key tax difference at a glance
| Spread bets | CFDs |
Capital gains tax | Exempt for most retail traders | Payable above £3,000 annual allowance |
CGT rate (basic rate taxpayer) | N/A | 18% |
CGT rate (higher rate taxpayer) | N/A | 24% |
Stamp duty | Exempt | Exempt |
Loss offsetting against other CGT gains | No | Yes |
Income tax (if classified as professional trader) | May apply | May apply |
Is spread betting tax free in the UK?
This makes spread betting the most tax-efficient way to trade in the UK for most retail traders. You do not need to declare spread betting profits on a self-assessment return, and you pay no stamp duty on opening a position.
There are two important limits to this:
You cannot use spread betting losses to offset other capital gains. The tax-free status works both ways — HMRC treats spread betting as gambling, which means losses carry no tax relief.
If HMRC determines that spread betting is your primary source of income and is conducted as a business or trade, the tax-free status may be challenged and profits could become subject to income tax. This applies to a small minority of very high-volume, professional-level traders.
How are CFDs taxed in the UK?
CFD profits are subject to capital gains tax for most retail traders. CGT is payable on net profits above the annual CGT allowance, currently £3,000 for the 2025/26 tax year.
Following the October 2024 Budget, the CGT rates on financial assets are:
18% for basic rate taxpayers
24% for higher and additional rate taxpayers
This is a meaningful increase from the previous rates of 10% and 20% respectively. For a higher rate taxpayer generating £10,000 in net CFD profits above the allowance, the tax liability increased from £2,000 to £2,400 as a result of this change.
The significant advantage of CFDs over spread bets from a tax perspective is loss offsetting. CFD losses can be used to offset other capital gains in the same tax year, or carried forward to offset gains in future years. This makes CFDs a useful tool for investors who want to hedge an existing portfolio, since any CFD losses incurred on a short position can offset gains elsewhere.
Like spread bets, CFDs are not subject to stamp duty, since no transfer of underlying asset ownership occurs.
Tax example: spread bet vs CFD on the same trade
Suppose you take a long position on the FTSE 100 and make a profit of £8,000.
As a higher rate taxpayer using a spread bet, your £8,000 profit is entirely tax-free. You keep £8,000.
As a higher rate taxpayer using a CFD, your £8,000 profit exceeds the £3,000 annual allowance by £5,000. You pay 24% CGT on that £5,000, a tax bill of £1,200. You keep £6,800.
The difference is £1,200 on a single trade. At higher volumes, the spread betting tax advantage becomes substantial.
Now suppose the trade goes against you and you lose £5,000 instead.
With a spread bet, you lose £5,000 and cannot use that loss to reduce any other tax bill.
With a CFD, you lose £5,000 and can offset that against other capital gains in the same year, reducing your overall CGT liability. If you had £5,000 in gains elsewhere, the CFD loss effectively eliminates that tax bill entirely.
Which is better: spread bets or CFDs?
There is no universal answer; it depends on your individual circumstances and how you use the products:
Spread bets are generally more tax-efficient for traders who generate consistent profits and have no other capital gains to offset. The full tax-free status means you retain more of your gains without needing to manage your tax position.
CFDs are generally more useful for traders who also hold an investment portfolio, where the ability to offset CFD losses against portfolio gains adds genuine tax planning value. They are also the product available to non-UK residents, since spread betting is a UK and Ireland-specific product.
For a full comparison of both products beyond the tax treatment, see our spread betting vs CFDs guide.
The impact of the October 2024 CGT increase
The October 2024 Budget raised CGT rates on financial assets from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher rate taxpayers. This change came into immediate effect.
For active CFD traders generating meaningful profits, this increases the relative attractiveness of spread betting as the tax-free alternative. Higher rate traders keeping 100% of spread betting profits now save 24p in every pound relative to the equivalent CFD gain — a material difference for anyone generating significant trading income.
Professional trader classification
As covered in our day trading tax guide, HMRC can classify both spread betting and CFD activity as a business if the scale, frequency, and nature of trading meets the ‘badges of trade’ criteria. If this applies, profits from either product become subject to income tax rather than the CGT or gambling exemption frameworks. This is uncommon for retail traders but becomes a genuine risk for those trading professionally at high volumes.
Reporting CFD profits to HMRC
If you have taxable CFD profits, they must be reported via self-assessment on the SA108 capital gains form. Spread betting profits do not need to be reported. HMRC receives transaction data from trading platforms through the Common Reporting Standard, so accurate record-keeping is important.
