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CFD Taxes

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Written By
Jemma Grist
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Written By
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. As a former management consultant, he has worked on major operational transformation programmes at prominent European 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
    UnitedPips
    40% Deposit Bonus
    Ratings
    2 / 5
    3.5 / 5
    3 / 5
    3.8 / 5
    3.5 / 5
    3.5 / 5
    2.8 / 5
    2.5 / 5
    0 / 5
    0 / 5
    $10
    0.01 Lots
    1:1000
    IFSA
    CFDs, Forex, Precious Metals, Crypto
    UniTrader
    PayPal, Credit Card, Debit Card, Perfect Money, Bitcoin Payments, Ethereum Payments
    USD
    Go To UnitedPips
  2. 2
    Interactive Brokers
    Ratings
    4.5 / 5
    3.5 / 5
    4.6 / 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, AFM
    Stocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, Cryptocurrencies
    Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, TradingView, eSignal, TradingCentral, ProRealTime, Quantower
    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
  3. 3
    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, AFM
    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
  4. 4
    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
  5. 5
    Dukascopy
    10% Equity Bonus
    Ratings
    3.5 / 5
    3.5 / 5
    3.8 / 5
    3 / 5
    4.3 / 5
    4 / 5
    4.5 / 5
    3.5 / 5
    4.6 / 5
    3.7 / 5
    $100
    0.01 Lots
    1:200
    FINMA, JFSA, FCMC
    CFDs, Forex, Stocks, Indices, Commodities, Crypto, Bonds, Binary Options
    JForex, MT4, MT5
    Neteller, Wire Transfer, Mastercard, Skrill, Visa, Maestro, Credit Card, Debit Card, Apple Pay, Bitcoin Payments, Ethereum Payments
    USD, EUR, GBP, CAD, AUD, NZD, JPY, ZAR, TRY, SEK, NOK, DKK, CHF, HKD, SGD, PLN, CZK, AED, SAR, HUF, MXN
    Go To Dukascopy
  6. 6
    Capitalcore
    40% Deposit Bonus up to $2,500
    Ratings
    3.3 / 5
    3.8 / 5
    3.5 / 5
    3 / 5
    3.8 / 5
    3.5 / 5
    2.5 / 5
    3.5 / 5
    0 / 5
    0 / 5
    $10
    0.01 Lots
    1:2000
    IFSA
    Forex, Metals, Stocks, Cryptos, Futures Indices
    WebTrader, Pro
    Ethereum Payments, Mastercard, Visa, Perfect Money, Bitcoin Payments, Debit Card, Credit Card, PayPal
    USD
    Go To Capitalcore
  7. 7
    Sage FX
    $1,500 trading competition
    Ratings
    2.5 / 5
    3.5 / 5
    3 / 5
    3.3 / 5
    2.5 / 5
    3 / 5
    1.3 / 5
    1.8 / 5
    5 / 5
    4.1 / 5
    $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
  8. 8
    Videforex
    20% to 200% Deposit Bonus
    Ratings
    2.5 / 5
    3 / 5
    3.5 / 5
    3.3 / 5
    3.5 / 5
    4.5 / 5
    1.3 / 5
    1.3 / 5
    4.1 / 5
    4.4 / 5
    $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
  9. 9
    xChief
    $100 No Deposit Bonus
    Ratings
    4 / 5
    3.8 / 5
    3.7 / 5
    3 / 5
    4.3 / 5
    3.5 / 5
    3.5 / 5
    3.3 / 5
    4.8 / 5
    4.7 / 5
    $10
    0.01 Lots
    1:1000
    ASIC
    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
  10. 10
    Plexytrade
    120% Cash Welcome Bonus
    Ratings
    1.5 / 5
    2.5 / 5
    2.5 / 5
    3.3 / 5
    2.5 / 5
    3.5 / 5
    0.5 / 5
    0.5 / 5
    4.8 / 5
    4.7 / 5
    $50
    0.01
    1:2000
    CFDs, Forex, Indices, Stocks, Commodities, Crypto
    MT4, MT5
    Bitcoin Payments, Ethereum Payments
    USD, EUR
    Go To Plexytrade

This is why we think these brokers are the best in this category:

  1. UnitedPips - UnitedPips supports CFD trading on a narrow selection of currencies, metals and cryptos. It somewhat compensates for the meagre asset range with high leverage up to 1:1000, seriously amplifying potential profits or losses, and spreads that don’t change with market conditions.
  2. 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.
  3. 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.
  4. 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.
  5. Dukascopy - Dukascopy offers highly leveraged CFD trading up to 1:200. A wide selection of asset classes are available, including currencies, equities, commodities, ETFs and cryptos. Spreads are tight starting from 0.1 pips and traders get 24/7 support that performed well during testing. However, the real standout is the security provided by trading CFDs through a multi-regulated broker and Swiss bank
  6. Capitalcore - The range of CFDs at Capitalcore is narrow, with 6 precious metals, 6 indices, and a slim suite of stocks. Notably, there are no commodities such as oil or gas and spreads vary greatly. Tiered leverage is available depending on the account, from 1:100 to 1:2000.
  7. 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.
  8. 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.
  9. 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.
  10. Plexytrade - Plexytrade offers a modest selection of CFDs, providing opportunities to speculate on upward/downward price movements across 15 indices, 48 US stocks, 3 commodities, 4 metals, and 5 cryptos. The free margin calculator allows you to work out how much you need to put down to open and maintain leveraged positions.

CFD Taxes Comparison

CFD Taxes Comparison
Broker CFD Leverage Minimum Deposit Minimum Trade Regulators
UnitedPips logo
1:1000 $10 0.01 Lots IFSA
Interactive Brokers logo
1:50 $0 $100 FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM
RedMars logo
1:30 (Retail), 1:500 (Pro) €250 0.01 Lots CySEC, AFM
IQCent logo
1:500 $250 $0.01 IFMRRC
Dukascopy logo
1:200 $100 0.01 Lots FINMA, JFSA, FCMC
Capitalcore logo
1:2000 $10 0.01 Lots IFSA
Sage FX logo
1:500 $10 0.01 Lots Pending
Videforex logo
1:500 $250 $0.01 -
xChief logo
1:1000 $10 0.01 Lots ASIC
Plexytrade logo
1:2000 $50 0.01 -

UnitedPips

"UnitedPips is ideal for traders seeking leveraged trading opportunities, the security of fixed spreads, and the flexibility to deposit, withdraw, and trade cryptocurrencies - all in one sleek TradingView-powered platform."

Christian Harris, Reviewer

UnitedPips Quick Facts

Bonus Offer40% Deposit Bonus
FTSE SpreadNA
GBPUSD Spread1.3
Stocks SpreadNA
Leverage1:1000
RegulatorIFSA
PlatformsUniTrader
Account CurrenciesUSD

Pros

  • Although being handed off mid-chat due to shift changes during testing was frustrating, customer support is generally good with quick, helpful responses, and 24/7 support via phone and email for regional teams is a definite advantage.
  • UnitedPips offers impressive leverage up to 1:1000 with zero swap fees or commissions, which can enhance potential returns for day traders and swing traders looking to control prominent positions with less capital.
  • UnitedPips’ platform performs well, with an intuitive design that will appeal to beginners, while the TradingView integration delivers powerful charting tools without overwhelming users, making it straightforward to execute trades efficiently.

Cons

  • UnitedPips lacks comprehensive research, while the educational content for beginner traders is woeful. Compared to brokers like eToro, which offers tutorials, webinars, and advanced courses, UnitedPips offers minimal resources to help new traders understand key concepts.
  • Unlike brokers such as IG, UnitedPips is an offshore broker not regulated by any 'green tier' financial authorities, raising concerns for traders seeking assurance and protection under well-established regulatory frameworks.
  • UnitedPips' selection of tradable instruments is still minimal, comprising a bare minimum selection of forex, metals and crypto. There are no equities, indices or ETFs, which may be a drawback for experienced traders looking for diverse opportunities.
Visit UnitedPips
UnitedPips 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, AFM
PlatformsTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, TradingView, eSignal, TradingCentral, ProRealTime, Quantower
Account CurrenciesUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF

Pros

  • While primarily geared towards experienced traders, IBKR has made moves to broaden its appeal in recent years, reducing its minimum deposit from $10,000 to $0.
  • 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.
  • The new IBKR Desktop platform takes the best of TWS while adding bespoke tools like Option Lattice and Screeners with MultiSort to create a genuinely impressive trading experience for day traders at every level.

Cons

  • 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.
  • Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
Visit Interactive Brokers
Interactive Brokers 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, AFM
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
  • Clients in the EU, in particular, can trade with peace of mind knowing RedMars is authorized by the CySEC with up to €20K compensation available through the ICF in the event of bankruptcy
  • The broker supports a range of flexible payment methods, including wire transfers, credit cards, e-wallets, and notably cryptocurrencies

Cons

  • 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
  • The no-frills trading environment offers little beyond the basics, with no Islamic account, PAMM account or copy trading.
  • 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
Visit RedMars
RedMars 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

  • IQCent is one of the few binary options brokers that also offers a copy trading service for hands-off traders
  • The broker offers up to 98% payouts on binary options, which is more than alternatives like Pocket Option, only offering up to 92%
  • There's an accessible $0.01 minimum stake for new day traders with a small budget

Cons

  • IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
  • The market analysis is very basic with limited technical summaries and insights from analysts
  • IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
Visit IQCent
IQCent Review

Dukascopy

"If you’re an experienced trader, Dukascopy provides the tools you need: JForex for algorithmic strategies, competitive spreads from 0.1 pips, leverage up to 1:200, and the peace of mind of using a Swiss-regulated bank and broker."

Christian Harris, Reviewer

Dukascopy Quick Facts

Bonus Offer10% Equity Bonus
FTSE Spread100
GBPUSD Spread0.1
Stocks Spread0.1
Leverage1:200
RegulatorFINMA, JFSA, FCMC
PlatformsJForex, MT4, MT5
Account CurrenciesUSD, EUR, GBP, CAD, AUD, NZD, JPY, ZAR, TRY, SEK, NOK, DKK, CHF, HKD, SGD, PLN, CZK, AED, SAR, HUF, MXN

Pros

  • Dukascopy offers tight spreads starting from 0.1 pips, leverage up to 1:200 (depending on the jurisdiction), and volume-based commissions that reward high-frequency traders.
  • Dukascopy is regulated by the Swiss Financial Market Supervisory Authority (FINMA) as both a broker and a bank, ensuring top-tier financial security and adherence to strict standards.
  • The proprietary JForex platform is highly advanced, offering tools for algorithmic trading, extensive charting, and access to deep liquidity for short-term traders.

Cons

  • While JForex is feature-rich, it has a steep learning curve, making it less suitable for beginner traders who might prefer simpler platforms.
  • Some account types, such as the MT4/MT5 accounts, require a higher minimum deposit of $1,000, which may not be ideal for traders with smaller budgets.
  • While Dukascopy provides some educational resources and 24/7 support, the complexity of its platforms and tools required extensive testing and may overwhelm newer traders.
Visit Dukascopy
Dukascopy Review

Capitalcore

"The major selling points of Capitalcore are its high leverage options up to 1:2000 and zero commission or swap fees. However, its weak regulatory oversight from the IFSA and non-existent education place it far behind the top brokers."

Christian Harris, Reviewer

Capitalcore Quick Facts

Bonus Offer40% Deposit Bonus up to $2,500
FTSE Spread25
GBPUSD Spread0.5
Stocks Spread1.5 (Apple)
Leverage1:2000
RegulatorIFSA
PlatformsWebTrader, Pro
Account CurrenciesUSD

Pros

  • The Capitalcore platform provides comprehensive charting tools and a wide range of 150+ technical indicators, ideal for detailed market analysis.
  • Unlike most brokers, Capitalcore offers an unlimited demo account that takes under 5 minutes to open.
  • Capitalcore is one of the only brokers to charge zero swap fees, which may appeal to Islamic traders looking to comply with Islamic Finance.

Cons

  • The web platform was inconsistent during testing, with occasional technical glitches that meant the trading platform wouldn’t load.
  • Platform support is limited to proprietary software, so there's no integration with the market-leading MetaTrader or cTrader, which offer built-in economic news and support automated trading.
  • Capitalcore’s threadbare education and research seriously trail category leaders like IG, making it less suitable for aspiring traders.
Visit Capitalcore
Capitalcore 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

  • Fast withdrawal processing
  • Bonus offers and trading competitions
  • High leverage up to 1:500

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

Videforex

"Videforex will serve traders looking for a no-frills, easy-to-use platform to speculate on the direction of popular financial markets through binaries. With a sign-up process that takes a matter of minutes and a web-accessible platform, getting started is a breeze. "

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 regularly runs trading contests, offering practice opportunities and cash prizes to beginners and experienced traders, with position sizes from just ¢0.01.
  • Traders can earn up to 98% payouts on 100+ assets with the broker’s binary options, bringing it in line with competitors like IQCent.
  • Videforex is one of the few brokers with 24/7 multilingual video support, providing comprehensive assistance for active traders.

Cons

  • Videforex lacks authorization from a trusted regulator, meaning traders may receive little to zero safeguards like segregated client accounts.
  • The absence of any educational tools is a serious drawback for newer traders who can find blogs, videos and live trading sessions at category leaders.
  • The client terminal needs improvements based on our latest tests, sporting sometimes slow and unresponsive widgets which could dampen the experience for day traders.
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
RegulatorASIC
PlatformsMT4, MT5
Account CurrenciesUSD, EUR, GBP, JPY, CHF

Pros

  • xChief delivers a high-quality day trading environment via the MT4 and MT5 platforms, with market-leading charts, indicators and tools
  • Traders can access a copy trading solution via the MetaQuotes Signals service
  • The broker offers several account types to suit different traders, including a Cent account for beginners and pro-level hedging/netting accounts

Cons

  • The Classic+ and Cent accounts provide access to fewer instruments than the other account types, at 50+ and 35+, respectively
  • The broker trails competitors when it comes to research tools and educational resources
  • The total range of 150+ assets is much lower than most competitors who typically offer hundreds
Visit xChief
xChief Review

Plexytrade

"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."

Christian Harris, Reviewer

Plexytrade Quick Facts

Bonus Offer120% Cash Welcome Bonus
FTSE Spread0.8
GBPUSD Spread0.8
Stocks Spread5
Leverage1:2000
PlatformsMT4, MT5
Account CurrenciesUSD, EUR

Pros

  • US residents are accepted as clients, distinguishing Plexytrade as one of the rare offshore brokers that cater to US-based traders.
  • Plexytrade accommodates a range of trading methods and short-term strategies, including scalping, hedging, and automated trading.
  • Despite lacking regulation, Plexytrade provides negative balance protection and reinforces safety protocols by holding client funds in segregated accounts.

Cons

  • There are no research and educational materials, falling short of alternatives like IG, while access to the economic calendar is restricted to clients with balances of $500.
  • With around 100 instruments, Plexytrade restricts the flexibility of investors who prefer to trade across various assets, especially compared to Blackbull with its 26,000 securities.
  • Deposits and withdrawals are exclusively facilitated through cryptocurrencies, as Plexytrade does not support bank cards, bank wire transfers, or e-wallets.
Visit Plexytrade
Plexytrade 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!