Not tax advice. This guide is general information about UK tax rules as we understand them on 17 October 2026, with links to official HMRC and GOV.UK sources. Tax depends on your personal circumstances and the rules can change. Before you file anything, speak to a qualified accountant or tax adviser, or contact HMRC.
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How you’re taxed in the UK depends far more on what you’re trading through than on what you’re trading. The same FTSE 100 trade could be:
- outside Capital Gains Tax as a spread bet
- subject to Capital Gains Tax as a CFD
- something different again if you’re trading a prop firm account, where any payout comes from the firm under a contract
This guide covers each one, then the Self Assessment basics and the records you should keep.
Quick summary
| How you trade | Usual tax treatment for an individual | Losses | Key source |
|---|---|---|---|
| Futures (your own account) | Capital Gains Tax, unless the activity amounts to a trade. No spread-bet exemption | Allowable losses can be set against gains | HMRC CG56100; see section below |
| Spread betting (your own account) | Normally no Capital Gains Tax or Income Tax – treated as betting | Not deductible | HMRC CG56105, BIM22015 |
| CFDs (your own account) | Capital Gains Tax, unless the activity amounts to a trade | Allowable losses can be set against gains | HMRC CG56100 |
| Prop firm payouts | No specific HMRC guidance found. Commonly treated as self-employment (trading) income – Income Tax and Class 4 NI through Self Assessment | Depends on treatment – ask an accountant | See section below |
“Normally” and “usually” matter here. The exceptions are explained below.
Futures: Capital Gains Tax (general information)
General information, not tax advice. For most individuals, gains and losses on futures contracts traded through your own account are treated as capital gains and losses and fall under Capital Gains Tax, unless HMRC considers the activity a trade (CG56100). The same CGT allowance and rates shown in the CFD section below apply.
- No spread-bet exemption. The same market move can be tax-free as a spread bet and taxable as a futures trade.
- Losses can usually be set against capital gains if you report them to HMRC, normally within four years of the end of the tax year.
- Dollars: US futures gains and losses are in dollars and need converting to pounds. Keep a record of the rates you use.
- Prop firm accounts are different: payouts from a futures prop firm’s simulated account aren’t gains on contracts you own – see prop firm payouts.
More in our lesson UK tax on futures. If you’re unsure, speak to a qualified accountant or HMRC.
Spread betting: why it’s usually tax-free
For most individuals, profits from financial spread betting aren’t taxed:
- No Capital Gains Tax. HMRC’s Capital Gains Manual says that with spread betting “no assets are acquired or disposed of and no chargeable gains or allowable losses arise” (CG56105). The law also says winnings from betting aren’t chargeable gains (TCGA 1992 s51).
- No Income Tax, normally. HMRC’s Business Income Manual says a person placing a spread bet “is not normally carrying on a trade… They are not taxable on the profits, nor do they receive relief for their losses” (BIM22015).
- No stamp duty, because you never own the underlying shares.
The catches:
- Losses get no tax relief. Because profits are outside tax, you can’t use spread betting losses to reduce other tax.
- There are exceptions. HMRC says whether a spread bet is taxable “will depend on the terms of the contract and the economic substance of what is done”. For example, it can be different where the bets are part of a trade or used for a commercial purpose such as hedging (BIM22020; BIM56900).
- Rules can change, and tax treatment depends on your circumstances. If spread betting is your main source of income, take professional advice.
Spread betting being tax-free doesn’t make it any less risky. Most retail spread betting and CFD accounts lose money (see Lesson 1.1 for providers’ published figures).
CFDs: Capital Gains Tax
HMRC treats retail CFDs as financial futures. Unless your profits are taxable as trading income, the results fall under Capital Gains Tax (CGT) (CG56100). HMRC also says that commission, overnight financing (“interest”) and dividend adjustments all go into the gain or loss calculation when the contract is closed – they aren’t treated as separate interest or dividend income.
CGT rates and allowance for 2026/27
| 2026/27 | |
|---|---|
| Annual tax-free allowance (Annual Exempt Amount) | £3,000 (GOV.UK) |
| Rate on gains within your basic rate band | 18% (GOV.UK) |
| Rate on gains above the basic rate band (higher/additional rate taxpayers) | 24% (GOV.UK) |
To find your rate, GOV.UK says to add your taxable gains (after the allowance) to your taxable income. Any part that falls within the basic rate band (£37,700 of taxable income in 2026/27) is taxed at 18%, and the rest at 24% (GOV.UK CGT rates).
Losses
CFD losses are “allowable losses”. You can set them against gains in the same tax year and carry unused losses forward to future years. You have to claim them – you can do this up to 4 years after the end of the tax year in which you made the loss (GOV.UK). This is a real advantage of CFDs over spread betting if you make losses.
When you need to report
You need to report and pay CGT if your taxable gains are above the £3,000 allowance. If you’re already registered for Self Assessment, you also need to report gains on your return if the total amount you disposed of assets for was more than £50,000, even if your gains are under the allowance (GOV.UK). Ask an accountant how “disposal proceeds” are worked out for leveraged CFDs, because that isn’t obvious.
Worked example (hypothetical)
During 2026/27 you close CFD trades with total gains of £8,000 and total losses of £2,500 (after costs).
- Net gain: £8,000 − £2,500 = £5,500
- Less annual allowance: £5,500 − £3,000 = £2,500 taxable
- If all of that falls within your basic rate band: £2,500 × 18% = £450
- If you’re a higher rate taxpayer: £2,500 × 24% = £600
Could CFD trading be taxed as income instead?
Possibly, but it depends on the facts. HMRC’s manual says CFD results are charged to CGT “unless the profits are taxable as trading income”, and points to Statement of Practice SP03/02 for guidance on when that applies (CG56100). If trading CFDs is effectively your full-time living, ask an accountant how it should be treated.
Prop firm payouts
This is the area people get most confused about, and where official guidance is thinnest.
What we know
- Most prop firm accounts are simulated. For example, FTMO says that “all accounts we provide to our clients are demo accounts with fictitious funds and any trading is in a simulated environment only” (FTMO, checked 17 October 2026). You aren’t buying or selling assets with your own money – you’re paid by the firm under its terms.
- That means the spread betting exemption doesn’t fit: you aren’t placing bets with your own stake. And CGT doesn’t fit neatly either, because you haven’t disposed of an asset.
- We couldn’t find any HMRC guidance specifically about prop firm payouts (as of 17 October 2026).
How payouts are commonly treated
Many UK accountants and guides treat regular prop firm payouts as self-employment (trading) income, taxed through Self Assessment like other sole trader income. GOV.UK says you’re likely to be trading if, for example, you “are paid for a service you provide” or you do something regularly to make a profit (GOV.UK – Working for yourself).
Some advisers argue that occasional payouts could be miscellaneous income instead. Either way they’re likely to be taxable income. The right answer depends on your contract with the firm and how you operate, so this is exactly where you need an accountant.
The rest of this section assumes payouts are treated as self-employment income.
The £1,000 trading allowance
The first £1,000 of gross trading income in a tax year is tax-free under the trading allowance (GOV.UK). HMRC’s self-employment notes say total receipts from self-employment and miscellaneous income of up to £1,000 are exempt and don’t need to be reported, unless they come from a connected party (SA103F notes 2026).
- Gross income of £1,000 or less: you may not need to tell HMRC. There are exceptions, for example if you want to claim a loss.
- Gross income over £1,000: you must register for Self Assessment. You can then either deduct the £1,000 allowance or deduct your actual allowable expenses – not both (GOV.UK).
Challenge fees as expenses: if your prop trading is a trade, evaluation fees, resets and related costs (such as charting subscriptions) may be allowable expenses. If your expenses are more than £1,000, claiming them can work out better than the allowance. Check with an accountant – HMRC’s tests on allowable expenses apply.
Income Tax rates 2026/27 (England, Wales and Northern Ireland)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Source: GOV.UK Income Tax rates. The Personal Allowance falls by £1 for every £2 of income over £100,000. Scotland has different Income Tax bands – see GOV.UK Scottish Income Tax.
Payouts are added to your other income, such as a salary. If your job already uses your Personal Allowance, your payouts are taxed from the first pound above any trading allowance or expenses.
National Insurance for the self-employed (2026/27)
- Class 4: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
- Class 2: if your profits are £7,105 or more, Class 2 is treated as paid to protect your National Insurance record, so you don’t pay it. Below that, you can choose to pay voluntary Class 2 at £3.65 a week.
Source: GOV.UK self-employed NI rates. Class 4 is based on your self-employment profits only, not your salary.
Worked example A (hypothetical): employed, small payouts
You earn a £30,000 salary through PAYE. In 2026/27 you receive £5,000 in prop firm payouts and spent £600 on challenge fees.
- Option 1 – trading allowance: £5,000 − £1,000 = £4,000 taxable profit
- Option 2 – actual expenses: £5,000 − £600 = £4,400 taxable profit
- Option 1 is lower here, so you’d likely use the allowance.
- Your salary already uses your Personal Allowance, and £30,000 + £4,000 stays within the basic rate band, so Income Tax = £4,000 × 20% = £800.
- Class 4 NI: £0 – profits are below £12,570.
- Class 2: nothing to pay, because profits are below £7,105 (you can choose to pay voluntarily).
Worked example B (hypothetical): payouts are your only income
You have no other income. Your prop firm profits after allowable expenses are £20,000 in 2026/27.
- Income Tax: (£20,000 − £12,570) × 20% = £1,486.00
- Class 4 NI: (£20,000 − £12,570) × 6% = £445.80
- Total: £1,931.80
Because the bill is over £1,000, payments on account are likely to apply. In your first year of Self Assessment, you’d pay the full bill plus a first payment on account (half of this year’s bill) by 31 January, then a second payment on account by 31 July (GOV.UK payments on account). Here that’s £1,931.80 + £965.90 = £2,897.70 due on 31 January 2028, and £965.90 on 31 July 2028. Many first-time filers are caught out by this, so set money aside as you go.
If you’re paid in crypto or US dollars
- US dollars (or other currencies): record the sterling value of each payout. The simplest method is the amount that actually arrives in your UK bank account, or a published exchange rate on the day. Use the same method every time and keep evidence.
- Crypto: HMRC says cryptoassets received as income are taxable at their value in pounds sterling when you receive them. If you later sell them, you may also owe CGT on any increase since you received them (GOV.UK). Keep records of the date, number of tokens and sterling value.
Using a limited company?
Some traders receive payouts through a limited company. That brings Corporation Tax, accounts, director duties and the cost of taking money out, and some prop firms’ terms may not allow it. It isn’t automatically cheaper. Get advice first.
Self Assessment: the basics
Key dates for the 2026/27 tax year (6 April 2026 – 5 April 2027)
| What | Deadline |
|---|---|
| Register for Self Assessment (if you haven’t filed before) | 5 October 2027 |
| Paper tax return | 31 October 2027 |
| Online tax return | 31 January 2028 |
| Pay tax owed (and first payment on account, if due) | 31 January 2028 |
| Second payment on account (if due) | 31 July 2028 |
Based on the deadline pattern GOV.UK publishes (deadlines, registration). For the 2025/26 tax year, which has just ended, the online return and payment deadline is 31 January 2027. The registration deadline was 5 October 2026 – if you’ve missed it, register as soon as possible.
Making Tax Digital for Income Tax
If you’re a sole trader with qualifying self-employment and property income over certain limits, you’ll need to keep digital records and send quarterly updates using compatible software (GOV.UK):
- Over £50,000 in 2024/25 → from 6 April 2026
- Over £30,000 in 2025/26 → from 6 April 2027
- Over £20,000 in 2026/27 → from 6 April 2028
Other things payouts can affect
Extra income can affect student loan repayments, the High Income Child Benefit Charge and some benefits. Check before assuming payouts only cost you Income Tax.
Record keeping
If you’re self-employed, you must keep records for at least 5 years after the 31 January submission deadline for the tax year (GOV.UK). For example, records for 2026/27 (filed by 31 January 2028) should be kept until at least the end of January 2033.
Keep:
- Payouts: firm statements or invoices, date, amount in the original currency, sterling amount received and the method used to convert
- Costs: receipts for every challenge fee, reset, activation fee and subscription, including failed attempts
- Bank and payment records: statements showing money in and out (Wise, PayPal, card statements, crypto wallets)
- Prop firm contracts and terms in force when you were paid
- For CFDs: your provider’s annual statements and a record of each closed position’s gain or loss including costs
- For spread betting: account statements. Even if no tax is due, they help if HMRC asks questions
Tip: open a separate bank account just for trading money, and record everything in a simple spreadsheet each month.
FAQ
Are prop firm payouts tax-free in the UK?
Very unlikely. They’re generally treated as taxable income. The spread betting exemption doesn’t usually apply because you aren’t betting with your own money.
Do I need to tell HMRC about a £500 payout?
If your total gross trading income for the tax year is £1,000 or less, the trading allowance may mean you don’t need to report it, but keep records. Over £1,000, you need to register for Self Assessment.
Can I claim failed challenge fees against my payouts?
Possibly, if your prop trading counts as a trade and the costs are wholly and exclusively for that trade. Alternatively, you can use the £1,000 trading allowance. You can’t do both. Ask an accountant.
Is spread betting always tax-free?
For most individuals, profits are outside CGT and Income Tax, but HMRC says it depends on the contract and what’s actually going on. Tax rules can change. Losses get no relief.
I’m a higher rate taxpayer – what CGT rate applies to CFDs?
24% on gains above the allowance for 2026/27 (GOV.UK).
Where can I get help?
A qualified accountant (look for ICAEW, ACCA, CIOT or ATT membership), HMRC’s Self Assessment helpline, or free help from TaxAid if you’re on a low income.
Official sources used in this guide
- HMRC Capital Gains Manual – CG56100 CFDs: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56100
- HMRC Capital Gains Manual – CG56105 Spread betting: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56105
- HMRC Business Income Manual – BIM22015, BIM22020, BIM56900: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22015 · /bim22020 · /bim56900
- Taxation of Chargeable Gains Act 1992 s51: https://www.legislation.gov.uk/ukpga/1992/12/section/51
- CGT allowance / rates / losses / reporting: https://www.gov.uk/capital-gains-tax/allowances · /rates · /losses · /work-out-need-to-pay
- Income Tax rates 2026/27: https://www.gov.uk/income-tax-rates
- Self-employed NI rates 2026/27: https://www.gov.uk/self-employed-national-insurance-rates
- Trading allowance: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income
- SA103F notes 2026: https://assets.publishing.service.gov.uk/media/69c26565cfa346b9d4704b35/SA103F_Notes_2026.pdf
- Self Assessment deadlines and registration: https://www.gov.uk/self-assessment-tax-returns/deadlines · https://www.gov.uk/register-for-self-assessment/self-employed
- Payments on account: https://www.gov.uk/understand-self-assessment-bill/payments-on-account
- Record keeping: https://www.gov.uk/self-employed-records/how-long-to-keep-your-records
- Making Tax Digital for Income Tax: https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax
- Cryptoassets received as income: https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-receive-cryptoassets
- Working for yourself (trading tests): https://www.gov.uk/working-for-yourself
All sources accessed 17 October 2026.
Important: This guide is general information, not tax advice, and doesn’t take your personal circumstances into account. Tax rules and rates change, and how they apply to you depends on your situation, including where in the UK you live. Speak to a qualified accountant or tax adviser before making decisions or filing a return. Good Trading Guide accepts no liability for actions taken based on this guide. Trading spread bets and CFDs is high risk and most retail traders lose money. See our risk warning.