You do not have to pay tax on forex trading if you are spread betting, however you do if you are trading spot or CFDs.

As an alternative to trading CFDs on forex, individuals and UK taxpayers can spread bets on foreign exchange.

Spread betting, as the name suggests, are wagers on the performance of an instrument or market rather than a trade, and though the methodology and pricing of these two types of transactions can look very similar, the tax treatment of any profits made in them is very different.

Profits made from trading are subject to UK capital gains tax, whilst under current legislation, profits generated through spread betting are tax-free. By the same token, losses made in trading can be offset against capital gains made elsewhere, whilst spread betting losses cannot.

For more information on forex trading tax, read our Q&A: Do you have to pay tax on forex trading?

The tax treatment is the principal difference between the two forms of speculation, however, some spread bets may be priced in a similar way to futures contracts; that is with the cost of carry or financing included in the quote at the outset, rather than being charged daily, as is the case in forex trade. Spread bets are also likely to have a fixed expiry, whether daily, weekly or quarterly. While FX trades, which are effectively CFD trades, have no fixed expiry unless you are trading a currency future or option, rather than the rolling spot contract.

The mechanics of spread betting on FX are very similar to those of trading FX. Of course, you will need to open a spread betting account to spread bet rather than a trading account. You will also want to familiarise yourself with the bets that spread betting providers offer and the contract lifetimes, and the way that they are priced that could be very different for say a rolling daily bet, a weekly bet or indeed a monthly or quarterly bet.

One obvious thing to try to do is to match the contract you are going to be betting on with your time horizons, and style of speculation daily bets won’t be much use to you if you have a two- or three-week-time horizon. Equally, a quarterly contract may not be your best choice if you are an intraday bettor.

FX is one of the most heavily traded spread betting markets.  The major currency pairs are ideal for day, swing and trend trading as they provide constant liquidity, tight pricing and volatility.

Of all the spread betting companies in the UK we’ve highlighted some of the top brokers to spread bet on forex.

Spread betting carries a high level or risk and losses can exceed your deposits. Featured brokers appear first. Learn about how brokers are ranked…

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Here are three of the best places to spread bet on FX

  • IG, no list highlighting the best spread betting broker of any category would be complete or accurate without the inclusion of IG.  They are consistently ranked as the most innovative, helpful and competitive brokers.  In the Investment Trends report, they show around 100,000 active clients versus the nearest competitor. IG’s FX spread betting offering to provide access to the greatest range of FX pairs, both major, vanilla and exotic.
  • Spreadex is a nice old school forex spread betting broker located just outside London.
    They tend to cater to more professional traders who value customer service above pricing.
  • ETX Capital are one of the oldest forex spread betting brokers in the UK. ETX was founded in 1965 as Monecor and remains a member of the London Stock exchange.
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