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CFD Taxes

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Written By
Jemma Grist
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Jemma Grist
Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.
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James Barra
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James Barra
James is an investment writer with a background in financial services. He has worked as a management consultant, where he delivered large-scale operational transformational programmes at some of Europe's biggest banks. James authors, edits and fact-checks content for a series of investing websites.
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Fact Checked By
William Berg
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Fact Checked By
William Berg
William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.
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Updated
Jun 13, 2024

CFD taxes are often overlooked, especially by newcomers to the industry, but it is an important aspect of trading, especially given the ever-increasing popularity of CFDs as an instrument. Taxation policies vary across the world, with some jurisdictions providing tax exemptions, while some class it as fully taxable income and others have banned their trade altogether. This article will review the basics of CFDs before discussing how they are taxed in some of the major financial jurisdictions.

Note, this article should not be construed as professional tax advice. Consult a local tax advisor for guidance in your jurisdiction.

CFD Trading Brokers

Click a broker for details
  1. 1
    DNA Markets
    Ratings
    3 / 5
    4 / 5
    4 / 5
    3.9 / 5
    3.5 / 5
    3.6 / 5
    1.8 / 5
    1.6 / 5
    4.8 / 5
    4.4 / 5
    $100
    0.01 Lots
    1:500
    ASIC
    CFDs, Forex, Indices, Commodities, Stocks, Crypto
    MT4, MT5
    Credit Card, Debit Card, Wire Transfer, BPAY, Skrill, Neteller, Bitcoin Payments, Bitwallet, AstroPay, Mastercard
    USD, EUR, GBP, CAD, AUD, NZD, SGD
    Go To DNA Markets
  2. 2
    IG
    Forex trading involves risk. Losses can exceed deposits.
    Ratings
    4.9 / 5
    4 / 5
    4.5 / 5
    3.5 / 5
    4.8 / 5
    4.5 / 5
    4.9 / 5
    5 / 5
    4.6 / 5
    4 / 5
    $0
    0.01 Lots
    1:30 (Retail), 1:250 (Pro)
    FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
    CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting
    Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral
    PayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit Card
    USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD
    Go To IG
  3. 3
    IQCent
    20% to 200% Deposit Bonus
    Ratings
    2.5 / 5
    3.3 / 5
    2.4 / 5
    4.3 / 5
    3.8 / 5
    2.5 / 5
    3 / 5
    2 / 5
    4.3 / 5
    4.1 / 5
    $250
    $0.01
    1:500
    IFMRRC
    Binary Options, CFDs, Forex, Indices, Commodities, Crypto
    Online Platform, TradingView
    Credit Card, Debit Card, Wire Transfer, Bitcoin Payments, Ethereum Payments, Visa, Mastercard
    USD, EUR
    Go To IQCent
  4. 4
    RedMars
    Ratings
    3.3 / 5
    3.5 / 5
    3.8 / 5
    3.5 / 5
    3.8 / 5
    4 / 5
    2.8 / 5
    3 / 5
    4.7 / 5
    4.6 / 5
    €250
    0.01 Lots
    1:30 (Retail), 1:500 (Pro)
    CySEC
    CFDs, Forex, Stocks, Indices, Commodities, Cryptos
    MT5
    Credit Card, Wire Transfer, Debit Card, Sticpay, FasaPay, Bitcoin Payments, Trustly, PayPal, Skrill, Neteller, Klarna, Mastercard, Visa
    USD, EUR
    Go To RedMars
  5. 5
    Interactive Brokers
    Ratings
    4.5 / 5
    3.5 / 5
    4.5 / 5
    4.3 / 5
    3.3 / 5
    3 / 5
    4.4 / 5
    4.3 / 5
    4.3 / 5
    4.5 / 5
    $0
    $100
    1:50
    FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
    Stocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, Cryptocurrencies
    Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral
    Cheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit Card
    USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF
    Go To Interactive Brokers
  6. 6
    Videforex
    20% to 200% Deposit Bonus
    $250
    $0.01
    1:500
    Binary Options, CFDs, Forex, Indices, Commodities, Crypto
    TradingView
    Skrill, Perfect Money, Bitcoin Payments, Neteller, Credit Card, Visa, Mastercard, Ethereum Payments
    USD, EUR, GBP, AUD, RUB
    Go To Videforex
  7. 7
    xChief
    $100 No Deposit Bonus
    $10
    0.01 Lots
    1:1000
    VFSC
    CFDs, Forex, Metals, Commodities, Stocks, Indices
    MT4, MT5
    Wire Transfer, Bitcoin Payments, Credit Card, UnionPay, Skrill, Neteller, WebMoney, Perfect Money, Debit Card, Ethereum Payments, FasaPay, Volet
    USD, EUR, GBP, JPY, CHF
    Go To xChief
  8. 8
    Axofa
    10% Deposit Bonus
    $1
    0.01 Lots
    1:1000
    SVGFSA
    Forex, CFDs, Stocks, Indices, Commodities
    MT5
    Debit Card, Credit Card, Visa, Mastercard, Neteller, Skrill, Bitcoin Payments, Wire Transfer
    USD, IDR
    Go To Axofa
  9. 9
    Sage FX
    $1,500 trading competition
    $10
    0.01 Lots
    1:500
    Pending
    Forex, indices, cryptos
    TradeLocker
    Credit Card, Visa, Mastercard, Bitcoin Payments, Ethereum Payments
    USD, EUR, GBP, CAD, AUD
    Go To Sage FX
  10. 10
    InstaTrade
    Ratings
    2.5 / 5
    3 / 5
    3 / 5
    3 / 5
    3.5 / 5
    3.5 / 5
    3.5 / 5
    3.3 / 5
    4.8 / 5
    4.4 / 5
    $1
    0.01
    1:1000
    BVI FSC
    FISP, CFDs, Forex, Stocks, Indices, Commodities, Cryptos, Futures
    InstaTrade Gear, MT4
    Visa, Mastercard, Wire Transfer, Credit Card, Debit Card, Bitcoin Payments, Ethereum Payments
    USD, EUR, RUB
    Go To InstaTrade

Here is a summary of why we recommend these brokers:

  1. DNA Markets - DNA Markets offers a recently enhanced suite of 800+ CFDs covering stocks, indices, forex, commodities and cryptos, providing opportunities to speculate on rising and falling prices. There are no restrictions on strategies with leverage up to 1:30 (Australia) or 1:500 (rest of world).
  2. IG - IG offers a huge selection of 17,000+ CFDs, providing more trading opportunities than most CFD brokers. Traders can go long or short on popular markets like stocks, currencies, commodities and cryptos, while custom price alerts and the IG Academy continue to enhance the trading experience.
  3. IQCent - CFDs are available on forex, indices, commodities and cryptos, although the range of 100+ instruments is limited compared to alternatives such as Quotex with 400+. Leverage is available up to 1:500 but the $250 minimum deposit is noticeably higher than competitors.
  4. RedMars - RedMars caters to various short-term trading styles across popular asset classes, including 7 commodities, 14 indices, and 120+ stocks. Leverage is available up to 1:30 (retail) and 1:500 (pro), amplifying results. However, there is no calculator to help with understanding margin requirements and the depth of investments is limited.
  5. Interactive Brokers - Over 8,000 CFDs are offered on a vast array of instruments, encompassing stocks, indices, forex, and commodities. Moreover, the TWS platform lends itself to seasoned day traders, offering a comprehensive selection of over 100 order types and algorithms, alongside premium market data sourced from reputable sources such as Reuters and Dow Jones.
  6. Videforex - Videforex CFDs are available on forex, indices, cryptocurrencies and commodities with up to 1:500 leverage and tight spreads from near zero. CFDs incur a commission fee of 1%–2.5% and up to 5% for leveraged trades.
  7. xChief - You can trade a competitive range of CFDs encompassing crypto, indices, energies and metals, with very high leverage up to 1:1000. ECN pricing is available, with spreads from 0.0 pips and low commissions from $2.50. A Cent account is also available for those on a smaller budget.
  8. Axofa - CFDs are available on popular asset classes with a competitive $1 minimum deposit. The MT5 integration will allow serious short-term traders to utilize the vast library of technical tools, bots and indicators, but the lack of any CFD trading education puts the broker behind many alternatives.
  9. Sage FX - Trade CFDs on forex, stocks, metals, energies, indices, cryptos and dollar futures. Sage FX offers tight spreads and high leverage on all instruments from 1:100 to 1:500.
  10. InstaTrade - InstaTrade offers the flexibility to trade CFDs across various markets, from stocks and indices to forex and commodities. Where it excels is its dynamic leverage up to 1:1000, amplifying potential returns and losses with negative balance protection preventing accounts from falling below zero.

CFD Taxes Comparison

CFD Taxes Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators
DNA Markets logo
1:500 $100 0.01 Lots ASIC
IG logo
1:30 (Retail), 1:250 (Pro) $0 0.01 Lots FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
IQCent logo
1:500 $250 $0.01 IFMRRC
RedMars logo
1:30 (Retail), 1:500 (Pro) €250 0.01 Lots CySEC
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
Videforex logo
1:500 $250 $0.01 -
xChief logo
1:1000 $10 0.01 Lots VFSC
Axofa logo
1:1000 $1 0.01 Lots SVGFSA
Sage FX logo
1:500 $10 0.01 Lots Pending
InstaTrade logo
1:1000 $1 0.01 BVI FSC

DNA Markets

"DNA Markets is an excellent choice for short-term traders familiar with the MetaTrader platforms. The smooth sign-up process also makes it easy to get started while the $100 minimum deposit is accessible. That said, DNA Markets trails the top brokers in education, research and mobile trading. "

Jemma Grist, Reviewer

DNA Markets Quick Facts

FTSE Spread1.7
GBPUSD Spread1.0
Stocks Spread1.0 cent + $0.02 per share, per side (Apple)
Leverage1:500
RegulatorASIC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, CAD, AUD, NZD, SGD

Pros

  • After a recent upgrade, there are now over 800 assets available to trade via CFDs, with a particularly impressive range of 120+ cryptos
  • Short-term trading strategies are permitted including scalping and automated trading using Expert Advisors (EAs)
  • DNA Markets offers top-rate platforms and charting tools for day traders with access to MT4 and MT5

Cons

  • Despite access to MT4 and MT5, there is no proprietary trading app for seamless account management whilst on the go
  • Although it continues to strengthen its client base and reputation, DNA Markets lacks the track record of top brokers like Vantage
  • Unlike many alternatives, there are limited educational and research tools for traders seeking an all-in-one solution
Visit DNA Markets
DNA Markets Review

IG

"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."

Christian Harris, Reviewer

IG Quick Facts

FTSE Spread1.0
GBPUSD Spread0.9
Stocks Spread0.02
Leverage1:30 (Retail), 1:250 (Pro)
RegulatorFCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB
PlatformsWeb, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral
Account CurrenciesUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD

Pros

  • As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust
  • The proprietary web-based platform continues to caters to traders of all levels, with advanced charting tools and real-time market data useful for day trading
  • IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, providing ample diversification opportunities

Cons

  • IG has discontinued its swap-free account, reducing its appeal to Islamic traders
  • While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients
  • IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors
Visit IG
IG Review

IQCent

"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "

Jemma Grist, Reviewer

IQCent Quick Facts

Bonus Offer20% to 200% Deposit Bonus
FTSE Spread1.4
GBPUSD Spread0.8
Stocks SpreadN/A
Leverage1:500
RegulatorIFMRRC
PlatformsOnline Platform, TradingView
Account CurrenciesUSD, EUR

Pros

  • The broker's 24/7 customer support is fast and reliable, responding within 1 minute during tests
  • IQCent is one of the few binary options brokers that also offers a copy trading service for hands-off traders
  • There's an accessible $0.01 minimum stake for new day traders with a small budget

Cons

  • There's no automated trading support for algo traders
  • IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
  • IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
Visit IQCent
IQCent Review

RedMars

"RedMars is the best fit for experienced day traders familiar with the MetaTrader 5 platform and based in the EU, where the broker is authorized by the CySEC. However, the threadbare education and research tools make it unsuitable for beginners."

Christian Harris, Reviewer

RedMars Quick Facts

FTSE Spread15
GBPUSD Spread0.7
Stocks SpreadVariable
Leverage1:30 (Retail), 1:500 (Pro)
RegulatorCySEC
PlatformsMT5
Account CurrenciesUSD, EUR

Pros

  • RedMars offers one of the best platforms for day trading, MT5, hosting 21 timeframes, dozens of analytical tools, flexible templates and algo trading
  • Getting started on RedMars is incredibly easy - you can be up and running in just a few minutes based on tests
  • The broker is one of a limited number of firms to offer an account specially designed for VIPs with premium support and invites to exclusive events

Cons

  • While RedMars' spreads are within industry averages, they don't offer a significant edge over the cheapest day trading brokers we've personally used, notably IC Markets
  • With just 300 instruments, RedMars offers a narrow trading environment, particularly compared to category leaders like BlackBull Markets which offers 26,000 assets
  • RedMars falls short for newer traders, with little in the way of education, no beginner-friendly platform, a steep minimum deposit, and inadequate support during testing
Visit RedMars
RedMars Review

Interactive Brokers

"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."

Christian Harris, Reviewer

Interactive Brokers Quick Facts

FTSE Spread0.005% (£1 Min)
GBPUSD Spread0.08-0.20 bps x trade value
Stocks Spread0.003
Leverage1:50
RegulatorFCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
PlatformsTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral
Account CurrenciesUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF

Pros

  • There's a vast library of free or paid third-party research subscriptions catering to all types of traders, plus you can enjoy commission reimbursements from IBKR if you subscribe to Toggle AI.
  • With low commissions, tight spreads and a transparent fee structure, IBKR delivers a cost-effective environment for short-term traders.
  • The TWS platform has clearly been built for intermediate and advanced traders and comes with over 100 order types and a reliable real-time market data feed that rarely goes offline.

Cons

  • TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
  • IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
  • You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
Visit Interactive Brokers
Interactive Brokers Review

Videforex

"Newer traders will find a lot to enjoy about trading binary options on Videforex's easy-to-use proprietary platform, as well as the broker's copy trading solution. Payouts also remain higher than most alternatives climbing to 98%."

William Berg, Reviewer

Videforex Quick Facts

Bonus Offer20% to 200% Deposit Bonus
FTSE SpreadFloating from 0.2
GBPUSD SpreadFloating from 0.1
Stocks SpreadNA
Leverage1:500
PlatformsTradingView
Account CurrenciesUSD, EUR, GBP, AUD, RUB

Pros

  • Videforex allows you to enter positions with just ¢0.01
  • Global clients can make free and fast transfers via a wide range of payment types, from credit cards to cryptocurrencies
  • The firm facilitates both day trading and binary options which is great for those looking to diversify their portfolios

Cons

  • The broker isn’t overseen by a trusted regulatory agency
  • No MetaTrader 4 integration
  • US clients aren’t accepted due to legal restrictions
Visit Videforex
Videforex Review

xChief

"xChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."

William Berg, Reviewer

xChief Quick Facts

Bonus Offer$100 No Deposit Bonus
FTSE Spread70
GBPUSD Spread0.9
Stocks Spread50
Leverage1:1000
RegulatorVFSC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, JPY, CHF

Pros

  • xChief offers STP/ECN execution with low spreads from 0.0 pips and low commission rates starting from $2.50 per side
  • The broker offers a turnover rebate scheme geared towards active investors, as well as trading credits and several other occasional bonuses
  • The low minimum deposit of $10 will appeal to beginners, as well as the beginners’ guides in the Library

Cons

  • xChief is an offshore broker with weak regulatory oversight from the VFSC, so traders will receive limited safeguards
  • The broker trails competitors when it comes to research tools and educational resources
  • Fees and minimums are imposed on most withdrawal methods, including a €60 minimum for SWIFT bank transfers
Visit xChief
xChief Review

Axofa

"Axofa could be a good option for clients looking for social trading features alongside the MT5 platform. The low entry requirements and ECN spreads are particularly promising, but the lack of transparency and respected regulatory oversight raises security concerns."

William Berg, Reviewer

Axofa Quick Facts

Bonus Offer10% Deposit Bonus
FTSE SpreadNA
GBPUSD SpreadFrom 1.6 pips
Stocks SpreadNA
Leverage1:1000
RegulatorSVGFSA
PlatformsMT5
Account CurrenciesUSD, IDR

Pros

  • Axofa offers the MetaTrader 5 platform which will particularly serve intermediate to experienced traders looking for advanced charting tools
  • There's a proprietary social/copy trading service for beginners looking to follow successful strategies and for experienced traders looking to sell their strategies
  • Low ECN spreads are available from 0.0 pips, plus reasonable commissions at $3.50 per side

Cons

  • There is limited verifiable information about the broker’s owners and background
  • The offshore operations and lack of any regulatory oversight is a major concern
  • There is a lack of transparency around pricing and account conditions, which significantly reduces the trust score
Visit Axofa
Axofa Review

Sage FX

"Sage FX will suit forex traders looking for high leverage and ECN spreads. The broker's prop trading service will also appeal to users looking for funded accounts with up to $200K available."

Tobias Robinson, Reviewer

Sage FX Quick Facts

Bonus Offer$1,500 trading competition
FTSE Spread5.0
GBPUSD Spread0.9
Stocks SpreadN/A
Leverage1:500
RegulatorPending
PlatformsTradeLocker
Account CurrenciesUSD, EUR, GBP, CAD, AUD

Pros

  • Prop trading accounts with multiple funding tiers
  • Low starting deposit from $10
  • Fast withdrawal processing

Cons

  • Not regulated by any reputable body
  • Lacks educational resources and other extra features
  • Relatively narrow range of asset classes
Visit Sage FX
Sage FX Review

InstaTrade

"Although InstaTrade offers active trading on a comprehensive platform, it stands out with its fairly unique Fixed Income Structured Product (FISP), providing passive investment opportunities with up to 50% returns in 6 months if conditions are met. "

Christian Harris, Reviewer

InstaTrade Quick Facts

FTSE Spread660
GBPUSD Spread0.2
Stocks Spread8 (Apple Inc)
Leverage1:1000
RegulatorBVI FSC
PlatformsInstaTrade Gear, MT4
Account CurrenciesUSD, EUR, RUB

Pros

  • InstaTrade claims to "guarantee" returns through the structured element of its passive trading solution (FISP), with applications approved within 24 hours.
  • InstaTrade delivers an excellent suite of charting tools for day traders with its web trader comprising 250+ indicators, 11 chart types and a user-friendly design.
  • InstaTrade TV, consisting of video interviews and valuable market insights spanning equities, cryptos and more, helps identify opportunities and inform short-term trades.

Cons

  • InstaTrade sports one of the most cluttered websites and client cabinets in the industry, potentially overwhelming new traders, especially compared to XTB’s intuitive trading journey and resources.
  • InstaTrade’s growing educational tools provide valuable information for aspiring traders, but still trail category leaders like eToro with no structured course based on experience level.
  • InstaTrade is registered in the offshore jurisdiction of the British Virgin Islands, resulting in limited regulatory safeguards for retail investors.
Visit InstaTrade
InstaTrade Review

What are CFDs?

Before you can learn about CFD taxes, it is important to understand CFDs themselves. A CFD, or contract for difference, is a financial instrument that allows traders to speculate on the price movement of an underlying asset over a length of time. CFDs can be taken out on a huge range of financial markets and assets, with profits and losses reflecting the price movements of their underlying assets.

CFDs are derivative assets, which means that traders are not purchasing the underlying asset, they are simply speculating on the direction of its price movement.

Essentially a contract between an investor and broker for one party to pay or receive the difference in the price of an asset between the time of entrance and exit of the position, CFDs can be used to trade on both increasing and decreasing asset values by way of going ‘long’ or going ‘short’.UK CFD taxes

The derivative nature of CFDs removes many of the barriers present with spot trading.

For example, you do not have to physically take ownership of the asset you are trading, such as a few hundred barrels of oil.

Moreover, you can use CFDs with leverage, which lets you borrow some of a trade’s stake from the broker to open a position larger than you normally would (note this increases both potential profit and loss).

This can provide exposure to expensive assets you otherwise wouldn’t be able to afford, as well as facilitating magnified trade size. However, the risk of loss is also amplified and margin trading can result in the loss of more capital than was initially staked, or even present in your trading account.

While CFD trading shares many of the same characteristics as spot trading, the ability to trade on margin and their speculative nature has implications on CFD taxes that require a closer look.

CFD Taxes In The UK

In the UK, CFD trading taxes are collected by HMRC (Her Majesty’s Revenue and Customs). When considering UK trading taxes, there are two main types to be aware of – stamp duty reserve tax (SDRT) and capital gains tax (CGT). Stamp duty is applied to the purchase of share assets, usually at 0.5%. Capital Gains Tax relates to any profits from the disposal of shares or other financial instruments.

CFD taxes do not include stamp duty reserve tax because the contracts are derivatives, rather than securities. This means that the investor does not physically purchase and take ownership of company shares, they simple speculate upon its price movements. This can make CFD trading quite attractive over spot stocks thanks to their tax freedoms.

Sadly, this does not mean CFD trading is tax-free – capital gains tax is still applied to any gains made from CFD trading. For the 2020/21 tax year, HMRC has established a Capital Gains tax-free allowance of £12,300 (£6,150 for trusts), so investors will only be taxed on their overall gains above the allowance amount. CFD trading losses can also be carried over into subsequent tax years, allowing you to offset against future profits and potentially reducing your Capital Gains Tax bill.

CFD Taxes In Australia

CFD taxes in Australia fall under the jurisdiction of the ATO, the Australian Taxation Office. Unlike the UK, for instance, where the taxation of CFDs is well-established and clear cut, ATO rules are a little more open to interpretation. The ATO’s TR 2005/15 ruling forms the basis for the tax treatment of CFDs in Australia. Although a complex ruling, tax treatment depends on whether your trading of CFDs is of the following nature:

Individual Investors

Individual investors who trade CFDs intending to make a profit fall within income tax regulations, with gains viewed as assessable income and losses as an allowable deduction. However, in some rare cases, CFDs can be viewed by the ATO as having a ‘non-profit-making purpose’. In this case, CFD taxes are considered liable for capital gains tax.

Trading As A Business

Where CFDs are traded as part of commercial or business transactions, they fall under income tax, with any gains considered as assessable income and any losses as an allowable deduction.

When deciding whether CFD taxes should be for trading ‘as a business’, the ATO will assess your approach against the following criteria:

If your trading falls into this category, it allows you to deduct any costs and expenses during the tax year against profits, as well as deducting CFD trading losses against other assessable income.

CFD Trading In Canada

CFD taxes in Canada sit within the remit of the CRA, the Canada Revenue Agency. Although CFD-specific tax guidance can be difficult to source in Canada given that instrument-specific rules are not provided by the CRA, trading tax regulations differ for investors and regular business traders.

Business or day traders – those who trade with high frequency, in high volume, on speculative positions and typically close positions on the same day or in short timeframes – have their profits taxed as business income at their marginal rate. Despite being 100% taxable, this has the benefit of offsetting trading losses against other sources of income, as well as being able to claim expenses against income.CFD taxes in the UK, US, Canada and Australia

However, infrequent or longer-term trading activity will likely mean your investment profits – if there are any – are viewed as capital gains. In Canada, capital gains are taxed at a clearly advantageous 50% of your marginal tax rate, with capital losses able to be offset against any other gains.

Each individual’s approach to CFD trading will help determine whether profits or losses are taxable under assessable income or capital gains. How you include CFD trading gains or losses in your tax return can be open to interpretation, so contact the CRA or seek professional tax advice from an accountant ahead of making decisions on CFD taxes.

For further clarification on trading taxes in Canada, please see our Canada taxes page.

CFD Trading In The USA

CFD trading is currently illegal in the US, as per restrictions introduced by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The ruling applies to both US citizens and residents and is enforceable with both domestic and overseas brokerages.

However, whilst US citizens and residents are barred from trading CFDs, US-based brokers are free to offer CFDs to residents and citizens of other countries where CFD trading is perfectly legal – for example the UK, Canada, Australia and Singapore.

Final Word On CFD Taxes

CFDs and taxes can often be murky waters to navigate through, both as a casual investor and a professional trader. Taxes on CFD trading differ by jurisdiction, with some countries like the UK classifying any potential CFD trading profits as capital gains, whereas others such as Australia largely viewing any CFD profits as assessable income.

It is important to stress that failing to meet tax obligations can have serious consequences with financial and criminal penalties often attached. So, whilst CFD taxes may not be the most thrilling topic, they must be well understood and considered.

This page is not trying to offer tax advice, it merely aims to decipher the multitude of regional regulations and approaches to CFD taxes that currently exist. Before you file any tax returns – CFD or otherwise – please obtain professional guidance from an accountant or advisor.

FAQs

Is CFD Trading Tax-Free?

CFD trading is generally not tax-free, though there are some jurisdictions with tax exemptions – in the UK, for instance, CFDs do not pay stamp duty. However, in most territories, CFDs are liable for either capital gains tax (CGT) or income tax. On rare occasions, CFD taxes can be zero as the trading can be considered a form of gambling and therefore free from taxation, but this is unlikely to be the case for almost all traders. Regulations will vary by jurisdiction.

CFD trading is illegal in a small number of countries, such as the US, Belgium and Hong Kong. However, in many other countries, like the UK, Australia, New Zealand, Canada and Singapore, CFD trading is a perfectly legal and attractive instrument for many traders. Always aim to use a popular, regulated, and trusted broker when trading CFDs.

In The UK, Are CFDs Taxed In The Same Way As Stocks And Shares?

CFDs are derivative assets, which means traders do not take ownership of the underlying asset, unlike with spot stocks and other securities. Therefore, CFD taxes do not include the stamp duty present for spots, though capital gains tax is still charged at the same rate.

Where Can I Learn More About CFD Trading?

CFDs are popular instruments for many retail day traders, though the opportunity for leverage makes CFD trading a risky endeavour. It is recommended to take some time to inform yourself of the markets, assets and associated risks, as well as carefully considering a strategy, before embarking on your journey. Check out our CFD trading guide before getting started.

Which Assets Can I Trade As CFDs?

CFDs can cover thousands of underlying assets and markets, such as stocks and shares, ETFs, bonds, forex, indices, cryptocurrencies and commodities. In fact, the choice of CFD asset classes is continually growing as more brokers come to the market. However, do your research to make sure they can be trusted!