How is day trading taxed in the UK?

Day trading tax: the quick summary

Spread betting: tax-free for most traders

Spread betting profits are free from capital gains tax and stamp duty for most UK residents. This is because HMRC classifies spread betting as gambling rather than investing, meaning profits fall outside the scope of CGT legislation.

This makes spread betting one of the most tax-efficient ways to day trade in the UK. There is no stamp duty on opening a position, and profits are not declared on your self-assessment tax return.

However, there are two important caveats.

First, because spread betting profits are not subject to CGT, you also cannot use spread betting losses to offset gains made elsewhere in your portfolio.

Second, if HMRC determines that spread betting constitutes your primary source of income and that you are conducting it as a professional trade, the tax-free status may not apply. This is rare but not impossible for very high-frequency, high-volume traders.

CFD trading: capital gains tax applies

Profits from CFD trading are subject to capital gains tax for most retail traders. This means CGT is payable on net profits above your annual CGT allowance, which is currently £3,000 for the 2025/26 tax year.

Current CGT rates on financial assets are:

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

Unlike spread betting, CFD losses can be used to offset other capital gains within the same tax year or carried forward to offset future gains. This makes CFDs a useful instrument for tax-efficient portfolio management and hedging.

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

Share trading: CGT and stamp duty

If you day trade actual shares rather than derivatives, the same CGT rules apply as for CFDs — profits above the £3,000 annual allowance are taxable at 18% or 24% depending on your income tax band.

Unlike CFDs, share purchases attract stamp duty reserve tax (SDRT) of 0.5% on each buy trade. This applies to UK-listed shares. US shares and most ETFs are exempt from UK stamp duty.

Losses on share trades can be used to offset other capital gains in the same year or carried forward.

Professional trader classification: when HMRC treats trading as a business

This is the area most day trading guides overlook, and it is the most consequential distinction for active traders.

HMRC uses a set of criteria known as the "badges of trade" to assess whether a person's trading activity constitutes a business rather than personal investing. If HMRC determines you are trading as a business, profits are taxed as income rather than capital gains — potentially at 20%, 40%, or 45% depending on your total income, plus National Insurance contributions.

The badges of trade include factors such as:

• The frequency and volume of your trading activity
• Whether you have a profit motive beyond ordinary investment returns
• Whether you have specialist knowledge or infrastructure set up for the purpose of trading
• Whether trading constitutes your primary occupation or source of income

There is no fixed threshold that triggers professional classification — it is assessed on the totality of circumstances. If you trade multiple times per day, have significant income from trading, and treat it as your primary occupation, the risk of professional classification increases meaningfully. If you believe this may apply to you, it is important to speak with a qualified tax adviser. HMRC's Business Income Manual (BIM56800) contains further guidance on this distinction.

Trading through an ISA

One option for tax-efficient trading is to use a stocks and shares ISA. Any gains and income generated within an ISA are free from capital gains tax and income tax, up to the annual £20,000 contribution allowance. However, ISAs are designed for longer-term investing rather than high-frequency day trading — the types of leveraged instruments typically used for day trading, such as CFDs and spread bets, cannot be held within an ISA.

If you trade shares directly and want to shelter gains, an ISA is a straightforward option for the portion of your portfolio not used for active trading.

Day trading tax example: spread bet vs CFD

Suppose you open and close a position on the FTSE 100 within the same trading day, making a profit of £5,000.

If you traded using a spread bet, that £5,000 is entirely tax-free for most UK residents. No CGT, no income tax, no reporting required.

If you traded using a CFD, your net profit of £5,000 exceeds the £3,000 annual CGT allowance by £2,000. As a higher rate taxpayer, you would pay 24% CGT on that £2,000 excess, resulting in a tax liability of £480.

The tax difference between instruments is real and material, particularly for traders generating consistent profits.

Reporting your trading to HMRC

If you have taxable day trading gains, you must report them through a self-assessment tax return. CGT gains from CFD and share trading are reported on the SA108 form. If HMRC classifies your trading as a business, profits are reported as self-employment income on the SA103F form.

HMRC may receive information directly from trading platforms through the Common Reporting Standard, so accurate record-keeping of all trades — including entry and exit prices, dates, and costs — is important.

How to day trade with us

With us, you can day trade using spread bets, CFDs, or direct share ownership. For a full comparison of the two main derivative products, see our guide on spread betting vs CFDs.