CFD Taxes

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

1. AvaTrade - AvaTrade's 1250+ leveraged CFD products span a wide range of asset classes including stocks, indices, commodities, bonds, crypto, and ETFs. You can speculate on underlying assets in the broker’s feature-rich web and mobile platforms with market-leading research tools to help discover opportunities.
2. Deriv.com - You can trade CFDs on popular markets, including the broker's exclusive synthetic indices which are available 24/7. There are plenty of charting tools available for technical traders, including over 20 indicators in the Deriv Trader platform. New users can also open an account and start trading CFDs instantly.
3. Pepperstone - Pepperstone maintains its position as one of the fastest and most dependable CFD brokers during our latest round of testing. With execution speeds averaging around 30ms and an outstanding fill rate of 99.90%, the broker ensures a seamless trading experience without requotes or dealing desk interference. It also provides ample trading opportunities across over 1,300 assets.
4. XM - Day traders can speculate on leveraged CFDs with zero commissions, spanning popular markets including currencies, equities and commodities. Additionally, the MetaTrader platforms collectively offer dozens of advanced technical indicators built for short-term strategies.
5. IC Markets - You gain access to over 2,250 CFDs, available for trading 24/5 across popular markets such as forex, commodities, indices, stocks, and bonds. Utilizing deep liquidity and advanced bridge technology, IC Markets ensures optimal conditions for scalpers, hedgers, and algo traders alike.

CFD Taxes Comparison

CFD Taxes Comparison

Broker	CFD Leverage	Minimum Deposit	Minimum Trade	Regulators	Visit
	1:30 (Retail) 1:400 (Pro)	-	0.01 Lots	ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM	Visit
	1:1000	$5	0.01 Lots	MFSA, LFSA, VFSC, BFSC	Visit
	1:30 (Retail), 1:500 (Pro)	$0	0.01 Lots	FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB	Visit
	-	$5	0.01 Lots	ASIC, CySEC, DFSA, FSC, FSCA	Visit
	1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global)	$200	0.01 Lots	ASIC, CySEC, FSA	Visit
	-	$100	0.01 Lots	ASIC, FCA, xCySEC, SCB	Visit
	1:30	$50	0.01 Lots	CySEC	Visit
	1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction.	$0	0.01 Lots	ASIC, FCA, MAS	Visit
	1:2000	$10	0.01 Lots	FSA, CySEC, FCA, FSCA, FSC, CBCS	Visit
	-	$100	0.01 Lots	ASIC	Visit
	1:200 (Retail), 1:500 (Pro)	$100	0.01 Lots	NFA, CFTC, CIRO, FCA, CYSEC, ASIC, SFC, FSA, MAS, CIMA	Visit
	-	$50	$10	FCA, ASIC, CySEC, FSA, FSRA, MFSA	Visit
	1:2000	$10	0.01 Lots	IFSC	Visit
	-	-	-	-	Visit
	1:1000	$20	0.01 Lots	-	Visit

#1 - AvaTrade

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Review

Why We Chose AvaTrade

AvaTrade's 1250+ leveraged CFD products span a wide range of asset classes including stocks, indices, commodities, bonds, crypto, and ETFs. You can speculate on underlying assets in the broker’s feature-rich web and mobile platforms with market-leading research tools to help discover opportunities.

"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."

- DayTrading Review Team

• FTSE Spread: 0.5
• GBPUSD Spread: 1.5
• Stocks Spread: 0.13
• Leverage: 1:30 (Retail) 1:400 (Pro)
• Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
• Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade

About AvaTrade

AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.

Pros

• WebTrader is well-suited to beginners and features a strong suite of technical analysis tools and market research for day traders
• The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
• AvaTrade is a heavily regulated and trustworthy broker with licenses from the ASIC, CySEC and more

Cons

• Traders from the US are not accepted
• There is no ECN account with raw spreads
• A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners

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#2 - Deriv.com

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Review

Why We Chose Deriv.com

You can trade CFDs on popular markets, including the broker's exclusive synthetic indices which are available 24/7. There are plenty of charting tools available for technical traders, including over 20 indicators in the Deriv Trader platform. New users can also open an account and start trading CFDs instantly.

"Deriv.com will suit day traders looking to make fast-paced trades using CFDs and multipliers with high leverage up to 1:1000. The broker is also the industry leader in synthetic indices, which simulate real market movements and are available around the clock. "

- DayTrading Review Team

• FTSE Spread: 0.5
• GBPUSD Spread: 0.5
• Stocks Spread: 0.07
• Leverage: 1:1000
• Regulator: MFSA, LFSA, VFSC, BFSC
• Platforms: Deriv Trader, MT5

About Deriv.com

Deriv.com is a low cost, multi-asset broker with over 2.5 million global clients. With just a $5 minimum deposit, the firm offers CFDs, multipliers and more recently accumulators, alongside proprietary synthetic products which can't be found elsewhere. Deriv provides both its own in-house charting software and the hugely popular MetaTrader 5.

Pros

• The free demo account is ideal for practicing short-term trading strategies and no registration is required
• Deriv bolstered its short-term trading opportunities in 2024 with accumulator options on simulated indices featuring up to 5% growth rates
• The low $5 minimum initial deposit suits those on a lower budget

Cons

• The range of 100+ assets trails some competitors such as Quotex which offers 400+
• There's no loyalty program or rebate scheme for high volume traders
• There are limited copy trading tools and analysis features compared to alternatives like IQ Cent

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#3 - Pepperstone

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Review

Why We Chose Pepperstone

Pepperstone maintains its position as one of the fastest and most dependable CFD brokers during our latest round of testing. With execution speeds averaging around 30ms and an outstanding fill rate of 99.90%, the broker ensures a seamless trading experience without requotes or dealing desk interference. It also provides ample trading opportunities across over 1,300 assets.

"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."

- DayTrading Review Team

• FTSE Spread: 1.0
• GBPUSD Spread: 0.4
• Stocks Spread: 0.02
• Leverage: 1:30 (Retail), 1:500 (Pro)
• Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
• Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade

About Pepperstone

Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.

Pros

• Now offering spread betting through TradingView, Pepperstone provides a seamless, tax-efficient trading experience with advanced analysis tools.
• Pepperstone emerges as a low-cost broker, especially for serious day traders with spreads from 0.0 in the Razor account and rebates of 25%+ through the Active Trader program.
• Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.

Cons

• Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
• There’s no simplified proprietary trading platform, nor are there any social trading features, which could be a disadvantage if you are new to day trading.
• Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.

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#4 - XM

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Review

Why We Chose XM

Day traders can speculate on leveraged CFDs with zero commissions, spanning popular markets including currencies, equities and commodities. Additionally, the MetaTrader platforms collectively offer dozens of advanced technical indicators built for short-term strategies.

"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."

- DayTrading Review Team

• FTSE Spread: 1.5 pts
• GBPUSD Spread: 1.9
• Stocks Spread: 0.002
• Regulator: ASIC, CySEC, DFSA, FSC, FSCA
• Platforms: MT4, MT5

About XM

XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.

Pros

• 1000+ instruments are available, including recently added thematic indices, providing exposure to emerging industries
• Powerful MT4 and MT5 platforms are available with 60+ and 80+ technical charting tools
• Accessible trading accounts with a $5 minimum deposit and fast account opening

Cons

• There is weak regulatory oversight through the global entity
• There's $5 inactivity fee after only 3 months, though this won't affect active traders
• PayPal deposits are not supported

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#5 - IC Markets

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Review

Why We Chose IC Markets

You gain access to over 2,250 CFDs, available for trading 24/5 across popular markets such as forex, commodities, indices, stocks, and bonds. Utilizing deep liquidity and advanced bridge technology, IC Markets ensures optimal conditions for scalpers, hedgers, and algo traders alike.

"IC Markets offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders."

- DayTrading Review Team

• FTSE Spread: 1.0
• GBPUSD Spread: 0.23
• Stocks Spread: 0.02
• Leverage: 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global)
• Regulator: ASIC, CySEC, FSA
• Platforms: MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade

About IC Markets

IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.

Pros

• With ultra-fast execution speeds averaging 35 milliseconds and deep liquidity, IC Markets provides an optimal trading environment for scalpers, hedgers, and algorithmic traders.
• IC Markets offers fast and dependable 24/5 support based on firsthand experience, particularly when it comes to accounts and funding issues.
• You have access to over 2,250 CFDs across various markets, including forex, commodities, indices, stocks, bonds, and cryptocurrencies, allowing for diversified trading strategies.

Cons

• There are fees for certain withdrawal methods, including a $20 wire charge, which can eat into profits, especially for frequent withdrawals.
• The breadth and depth of tutorials, webinars and educational resources still need work, trailing alternatives like CMC Markets and reducing its suitability for beginners.
• While IC Markets offers a selection of metals and cryptos for trading via CFDs, the range is not as extensive as brokers like eToro, limiting opportunities for traders interested in these asset classes.

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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’.

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:

• Trading as an individual investor
• Trading as a business
• Speculation

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:

• Organisation: Are you a registered business? Do you keep rigorous and up-to-date records of trading activities?
• Motivation: Are you trading with the express purpose of making a profit, rather than merely speculating on the markets?
• Behaviour: How frequently do you carry out trades, in what volume and of what size? How does this compare to other commercial CFD traders?
• Capital: How much capital is invested in your CFD trading activities? Is any capital set aside for other purposes?
• Skill: Can you demonstrate skill and discretion is being used in trades, rather than simply gambling on asset price movements?

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.

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.

Is CFD Trading Legal?

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!