Spread Betting & CFD Tax Implications for Swindon Investors

Spread betting and contracts for difference (CFDs) are popular ways for traders in Swindon and the UK to speculate on financial assets without owning the underlying asset. They are similar in many ways but have differences, such as how they are taxed. In this guide, we’ll walk you through all you need to know about both derivative instruments and their tax implications for investors in Swindon. 

What Is Spread Betting and CFD Trading? 

Spread betting is a popular derivative trading where traders speculate on the price movements of stocks, indices, currencies, commodities, or other financial instruments without owning the underlying asset. Traders bet on whether an asset will rise in price or fall based on what they observe on historical price charts, economic news or other fundamental or technical market metrics. Spread betting allows traders to use traders, which means Swindon investors can control more significant positions with a smaller initial investment. While this may raise each trade’s profit potential, it also multiplies possible losses. 

CFD trading is another form of derivative trading that is similar to spread betting. It allows traders to predict what an asset will likely be worth sometime in the future and bet in that direction. CFD traders do not need to own the asset before opening a trade contract. Upon opening a contract with a broker, the trader agrees to exchange the difference in the price in the future versus what it is at the time of the contract initiation. If a trader predicts the underlying asset will rise and fall, the trader will lose, but if the price goes in the expected direction, they will profit. CFD trading also banks on leverage so traders can control more prominent positions with smaller capital and scale potential profits. 

Key Differences Between Spread Betting and CFD Trading 

While spread betting and CFD trading have strong similarities, here are the key differences that make them stand out in their class: 

• When you trade spread bets, your bets have expiration dates, a limit not placed on CFD contracts. So, opening CFDs overnight is subject to extra charges. 
• You can open CFD contracts directly within the market, but spread betting requires operating over the counter (OTC) through a broker. 
• Regarding fees, spread betting companies do not take fees, but CFD trading requires you to pay commission and transaction fees. 
• Finally, while capital gains from profits from spread betting are tax-free, you must pay capital gains on CFD trades in Swindon. However, both are free from stamp duty charges. 

Spread Betting and CFD Trading Tax Implications for Local Investors in Swindon 

Spread betting companies operating in Swindon usually require a small deposit for trading. Local investors can significantly increase their profits by using leverage to work with a more significant position. However, winnings and losses may exceed the deposit. The company is obligated to pay all the profits made to the trader. Still, if the investor loses more than they deposit, they automatically owe the company and must settle the losses to keep their finances in check. 

Under His Majesty’s Revenue and Customs (HMRC) — the UK’s taxing authority — spread betting is deemed betting and not an investment, so no chargeable gains or allowable losses are attributed to it. That means as a local investor in Swindon, you get to keep 100% of all the profits you make on spread betting — nothing is taxed. However, the HMRC’s tax rule for CFD trading is different. As of last November, the HMRC updated capital gains tax rules. The standard rates used to be 10% for basic-rate taxpayers and 20% for higher-rate taxpayers, but are now 18% and 24%, respectively. 

You may qualify for an exemption from capital gains taxes from CFD trading based on your income level. For the 23/24 tax year, capital gains tax was exempted for any amount below £12,300, reducing drastically to £6,000 for the 24/25 tax year. As of 2025, investors can only make gains of up to £3,000 before the capital gains tax is applied. As a local Swindon investor, you’ll pay more taxes with the new capital gains tax. Also, you may need to employ the services of a tax specialist to determine the best way to manage your tax liability and use your annual exempt amount. You may need to reevaluate your trading strategy for higher tax rates. 

Important Tax Tips for Local Investors in Swindon 

Staying tax-compliant is equally important as any other measure you take to invest in Swindon. Here are some tax tips to keep in mind when trading CFDs: 

• Work with your tax advisor on how to report dividends from CFDs that offer such. 
• Keep a record of all your trades, including losses and gains. Your broker usually has an automatic system that extracts the data into a file. 
• Avoid holding on to losing positions to reduce losses and tax liability. 
• The HRMC drops updates relevant to how you trade, so watch out for news from the tax authority. 
• Sometimes, the CFDs you trade may yield dividends. Ensure you report them appropriately.  
• You can reduce your tax liability by carrying your losses forward or setting them against other gains.  

Higher Tax Liabilities on CFD Trading 2025 

As a local investor in Swidon, you don’t have to pay taxes on spread betting as the HMRC considers it as betting rather than an investment. However, if you trade CFDs, you must pay capital gains taxes. The rate depends on the amount of capital gains you make. For 2025, any amount after £3,000 is subject to capital tax gains. This means you’ll pay higher taxes than you did in previous years, requiring a more careful approach to avoid higher tax liabilities.