Capital gains tax on trading and investing: what you need to know

What is capital gains tax?

Capital gains tax is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It is not a tax on the full sale proceeds — only on the gain, meaning the difference between what you paid for an asset and what you received when you sold it.

CGT applies to a wide range of assets including shares, funds, ETFs, investment trusts, and most other financial instruments. It does not apply to assets held within an ISA or SIPP, to spread betting profits, or to your primary residence in most circumstances.

CGT is triggered by a disposal — selling, gifting, or transferring an asset. Simply holding an asset that has increased in value does not create a CGT liability. The liability arises when you dispose of it.

CGT rates and allowances for 2025/26

The annual CGT allowance — formally called the Annual Exempt Amount — is the amount of gain you can realise each tax year before CGT becomes payable. For 2025/26 and 2026/27, this is £3,000 per individual. It cannot be carried forward; if you do not use it in a given tax year, it is lost.

For context, the allowance was £12,300 as recently as 2022/23. It was cut to £6,000 in 2023/24 and to £3,000 in 2024/25, where it has remained. This reduction means many investors now face CGT liabilities on disposals that would previously have fallen entirely within the exemption.

CGT rates on financial assets (shares, funds, ETFs, CFDs) for 2025/26 are:

• 18% for basic rate taxpayers
• 24% for higher and additional rate taxpayers

These rates took immediate effect following the October 2024 Budget, rising from the previous 10% and 20% respectively. Your rate depends on your total taxable income in the tax year — your capital gains are stacked on top of your income, and any portion that exceeds the basic rate band is taxed at 24%.

Business Asset Disposal Relief applies a reduced rate on qualifying business asset gains — 14% for 2025/26, rising to 18% from April 2026. The lifetime limit is £1 million.

What triggers a CGT liability on trading and investing?

The following actions trigger a CGT disposal for UK tax purposes:

• Selling shares, funds, or ETFs held outside an ISA or SIPP
• Closing a CFD position at a profit
• Transferring assets as a gift (other than to a spouse or civil partner)
• Receiving assets in exchange for other assets

The following do not trigger CGT:

• Selling spread bets at a profit (exempt from CGT for most retail traders)
• Selling investments held within an ISA or SIPP
• Transferring assets between spouses or civil partners
• Bed and ISA transactions — though the disposal itself may trigger CGT if the gain exceeds the annual allowance

How spread betting avoids CGT

Spread betting profits are free from capital gains tax and stamp duty for most UK residents. HMRC classifies spread betting as gambling rather than investing, placing it outside the CGT regime entirely.

This makes spread betting one of the most tax-efficient ways to trade in the UK. You do not declare spread betting profits on a self-assessment return, and no stamp duty applies on opening a position.

The trade-off is that spread betting losses cannot be used to offset other capital gains. And if HMRC determines that spread betting constitutes your primary source of income and is conducted as a professional trade, the tax-free status may not apply — though this affects only a very small minority of high-volume, professional-level traders.

With us, spread betting is available on over 15,000 markets including shares, indices, forex and commodities. Spreads on major indices start from 0.4 points on the FTSE 100 and 0.4 points on the Wall Street, with no commission. This makes it one of the most cost-efficient and tax-efficient routes to trading short-term price movements available to UK retail investors.

CGT on CFD trading

CFD profits are subject to capital gains tax for most retail traders. CGT is payable on net profits above the £3,000 annual allowance, at 18% or 24% depending on your income tax band.

Unlike spread betting, CFD losses can be offset against other capital gains in the same tax year or carried forward to offset future gains. This makes CFDs a useful tool for investors who want to hedge a portfolio — any CFD losses can offset portfolio gains, reducing the overall CGT bill.

CFDs are not subject to stamp duty, since no transfer of underlying asset ownership occurs.

CGT on shares and funds

Profits from selling shares, funds, ETFs and investment trusts held outside an ISA or SIPP are subject to CGT at 18% or 24% above the £3,000 annual allowance.

Unlike CFD and spread betting disposals, share purchases attract stamp duty reserve tax (SDRT) of 0.5% on each purchase of UK-listed shares. US shares and most ETFs are exempt from UK stamp duty.

Share losses can be offset against other capital gains in the same tax year, or carried forward indefinitely. You must report losses to HMRC within four years of the end of the tax year in which they occurred.

How to reduce your CGT bill

There are several legitimate strategies for managing CGT exposure:

• Use your ISA allowance. Gains and income generated within a stocks and shares ISA are free from CGT and income tax. The annual ISA allowance is £20,000. Moving investments into an ISA via a bed and ISA transaction each year is one of the most effective long-term CGT management strategies available.
• Use your SIPP allowance. Gains within a SIPP are also free from CGT. Pension contributions also attract tax relief, making the SIPP the most tax-efficient long-term investment vehicle available to most UK investors.
• Spread disposals across tax years. Since the £3,000 allowance is use-it-or-lose-it, timing disposals to use the allowance in multiple tax years rather than concentrating them in one can reduce cumulative CGT.
• Transfer assets to a spouse or civil partner. Transfers between spouses and civil partners are not CGT events. This effectively doubles the available annual allowance across a couple.
• Offset losses against gains. Keep records of all losing positions — both within the current tax year and carried forward from prior years — and offset them against gains to reduce the taxable amount.
• Use spread bets for speculative positions. For short-term, higher-risk trades where you expect either to profit or take a loss, spread bets are tax-free on the upside and do not affect your CGT position on the downside.

Reporting CGT to HMRC

You must report capital gains to HMRC if your total gains in a tax year exceed the £3,000 annual allowance, or if your total disposal proceeds exceed four times the allowance (£12,000 for 2025/26), even if your net gains are below the threshold.

CGT is reported through self-assessment on the SA108 capital gains supplementary form. The deadline for online returns is 31 January following the end of the relevant tax year — so gains realised in the 2025/26 tax year (ending 5 April 2026) must be reported by 31 January 2027.

For UK residential property gains, there is an additional 60-day reporting requirement — you must report and pay any CGT within 60 days of completion of the sale, separately from your self-assessment return.

HMRC receives transaction data from brokers and trading platforms through the Common Reporting Standard, so accurate record-keeping of all trades, including purchase price, sale price, dates, and costs, is important.

How to trade and invest tax-efficiently with us

With us, you have access to the full range of products that allow you to manage your tax position actively:

• Spread bets — free from CGT and stamp duty for most UK retail traders, available on over 15,000 markets with spreads from 0.4 points on major indices
• CFDs — subject to CGT above the £3,000 allowance, but losses can offset other gains; no stamp duty
• Share dealing — buy shares and funds outright; subject to CGT outside tax wrappers; £0 commission on US shares
• Stocks and shares ISA — all gains and income sheltered from CGT and income tax, up to the annual £20,000 allowance
• SIPP — all gains sheltered from CGT, plus pension tax relief on contributions

For a full comparison of the tax treatment of spread bets and CFDs, see our guide on how are spread bets and CFDs taxed. For guidance on day trading tax specifically, see our day trading tax guide. For tax on forex trading, see our forex tax guide.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invest.