Do I Pay Forex Trading Tax In The UK (2025)?

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In the UK, taxation of income from Forex trading depends on the instruments used and your status. Profits from spread betting are generally tax-free, while income from contracts for difference (CFDs) is taxable. If trading is your main source of income, you are liable to pay the appropriate taxes.

The tax season often prompts questions about accounting for income from Forex trading. For UK residents, taxation of profits depends on several factors: the trading instruments used, whether trading is a primary or additional source of income, and the frequency of transactions.

In this article, we will look at when UK residents are required to pay tax on Forex profits and when trading can remain tax-free.

Is Forex trading taxable in the UK?

Confusion over tax rules often arises from the different approaches of traders. Some earn side income and pay no tax, while others trade as a main business and incur significant liabilities.

To understand your tax situation, let's look at how HMRC determines traders' liabilities depending on their activity.

Regulation and licensing in the UK

Brokerage activity in the UK is regulated by the FCA. To obtain a license, you need:

registration with Companies House;
payment of membership fees to a British bank;
having an office within the jurisdiction;
providing a full package of documents confirming the purposes of licensing and compliance with regulatory requirements.

Investors are protected by the FSCS compensation scheme, which covers losses of up to £85,000 per client if a financial company goes bust. However, it is important to remember that profits over £50,000 are taxed at 20%. Income under £50,000 is tax-free.

Taxation of Forex trading in the UK

In the UK, Forex traders are taxed on their income in one of four regimes, depending on the volume of trading and their employment status.

Income tax. levied on the total income of individuals.
Capital gains tax. Applied to profits from the sale of assets, including shares.
Corporate tax. Paid by limited companies on their profits.
Stamp duty. Aa tax on the purchase of shares.

This table below provides a clear overview of each tax regime, its applicability, and the corresponding rates and key notes for Forex trading in the UK.

Taxation of Forex trading in the UK
Tax Regime	Applicability	Tax Rates (2024/2025)	Notes
Income Tax	For self-employed or primary source traders	Personal Allowance: Up to £12,570 – 0%	Personal Allowance reduces by £1 for every £2 of income above £100,000. No allowance for income over £125,140.
		Basic Rate: £12,571 to £50,270 – 20%
		Higher Rate: £50,271 to £125,140 – 40%
		Additional Rate: Over £125,140 – 45%
Capital Gains Tax (CGT)	For casual/side traders (private investors)	Basic Rate Taxpayers: 10%	Annual Exempt Amount for 2024/2025: £3,000. Gains up to this amount are tax-free.
		Higher/Additional Rate Taxpayers: 20%
Corporation Tax	For trading conducted through a limited company	Small Profits Rate: 19% for profits up to £50,000	Marginal relief for profits between £50,000 and £250,000.
		Main Rate: 25% for profits over £250,000
Stamp Duty	Applicable on purchase of shares and some instruments	Varies based on the instrument involved	Generally not applicable to Forex trading unless dealing with specific options or futures.

Speculator or investor: what determines Forex taxation

HMRC distinguishes between speculators and professional traders.

Speculators receive tax-free profits, but their losses are not compensated.
Professional traders are required to pay taxes on their income, but can deduct losses from other income or use them to reduce the tax base.

Capital gains and stamp duty

The application of capital gains tax and stamp duty depends on the instruments used in trading. For instance, trading contracts for difference (CFDs) may have different tax implications compared to trading physical shares. It's essential to understand the specific tax treatments of the instruments you trade.

For detailed guidance, refer to HMRC's manuals on foreign exchange taxation and consult with a tax professional to ensure compliance with current regulations.

Case studies

To illustrate the ways in which these three factors interact, let’s consider the following hypothetical individuals, all of whom traded Forex during the 2023 tax year.

Ava enjoys her work as a freelance project manager, but finds the intellectual challenge of day trading exciting and occasionally engages in spread betting to make a bit of extra cash and keep her wits sharp. Due to the purely speculative nature of Ava’s activity and the specific instrument she’s chosen, HMRC considers her gains as gambling winnings, and she’ll pay neither personal income tax, nor capital gains tax, nor Stamp Duty Reserve tax.
Oliver works full time as a property manager, but also trades Forex Contracts for Difference as a source of secondary income. He’s had some success, earling about £18,000.00 this year, but his income from trading isn’t enough to allow him to quit his day job just yet. HMRC allows Oliver to deduct £1,000.00 in personal allowance from his Forex trading earnings, but he will pay personal income tax on the remaining £17,000.00 at the 2020-2023 Basic Rate of 20%. He is not required to register as self-employed or a sole trader with HMRC, but he also can’t deduct any trading losses against his income.
Ali makes a living as a full-time investor, supporting himself exclusively by trading in Forex and other markets. This year, he realized £120,000.00 in gains from Forex trading. Like Oliver, Ali may deduct £1,000.00 in personal allowance and will pay taxes on his remaining gains under the personal income tax regime, however he must also register as self-employed with HMRC and complete a Self-Assessment tax return. He’ll also need to pay capital gains tax on any CFD trading that exceeds the Capital Gains Tax Allowance.
Gemma owns a successful chain of ladies’ clothing shops, but also day trades in Forex as a source of income. In 2023, Gemma’s clothing business earned £250,000.00, however she lost money in the market - about £25,000.00 worth. Fortunately, because Gemma trades Forex with the intention to generate profits - as opposed to speculating - she has the option to offset her trading losses against income generated by her clothing business, thereby decreasing her overall liability.

One thing Oliver, Ali, Ava and Gemma have in common? Each sought the advice of an experienced tax professional prior to submitting a return. If, after reading this article, you have doubts about which tax scheme applies to you, we suggest contacting a licensed tax advisor or accountant with any questions to avoid hefty penalties from HMRC.

Who are the best Forex brokers in the UK?

One of the most significant challenges in preparing your tax return as a Forex trader? Accurate records! In the event that HMRC requests additional information regarding your tax bill, you’ll want to ensure you have all the relevant information regarding each transaction ready to hand.

Using a Forex trading broker not only simplifies the process of executing orders and sales, it also provides peace of mind come tax season. Licensed Forex brokers must retain records of your transactions, making the accounting process less painful.

Best Forex brokers in the UK
	Min. deposit, $	Max. leverage	Min Spread EUR/USD, pips	Max Spread EUR/USD, pips	Investor protection	Open an account
Eightcap	100	1:500	0,4	1,5	£85,000 €20,000	Open an account Your capital is at risk.
XM Group	5	1:1000	0,7	1,2	£85,000 €20,000	Open an account Your capital is at risk.
TeleTrade	10	1:500	0,8	1,4		Open an account Your capital is at risk.
Vantage Markets	50	1:2000	0,3	1,4	€20,000 £85,000	Open an account Your capital is at risk.
VT Markets	100	1:500	0,4	1,2		Open an account Your capital is at risk.

If you're trading Forex in the UK, consider using a spread betting account

If you're trading Forex in the UK, consider using a spread betting account. The HMRC views spread betting as gambling, so your profits are typically tax-free. This means you keep all your earnings without worrying about taxes. But remember, if you incur losses, you can't use them to offset other taxable income. So, while spread betting has tax perks, make sure it fits your trading style and risk tolerance.

Another option is to set up a limited company for your trading. This way, you might pay less tax through Corporation Tax rates, which could be lower than personal Income Tax rates, especially if you're earning more. Plus, you can deduct business-related expenses like trading software, internet bills, and courses, which can lower your taxable income. However, running a company comes with extra tasks like registration, annual reports, and following corporate rules. It's a good idea to talk to a tax expert to see if this route suits your trading activities and financial goals.

Conclusion

The amount of tax from Forex trading in the UK depends on the instruments you choose, the frequency of your trades and your status. Overall, your tax liabilities can vary significantly. Therefore, to avoid mistakes and penalties, we recommend that you determine the appropriate tax regime in advance and keep accurate records of your income and losses. Consulting with a tax specialist will help you structure your activities correctly and optimize your obligations to HMRC. Following these recommendations will ensure compliance with the law and allow you to focus on trading.

FAQs

What documents should I keep for Forex trading tax reporting?

Keep transaction records, trading account statements, proof of profit and loss, and trading expenses. This information will help you accurately calculate your tax liability and avoid questions from HMRC.

Are profits made in foreign currencies taxable?

Yes, profits made in foreign currencies are taxable in the UK. They must be converted into pounds sterling at the current rate at the time of receipt of the income.

Do I need to declare my trading income if I am under the tax threshold?

Yes, even if your income is below the minimum tax threshold, you must declare it. This is to comply with tax laws and to confirm that you have no liability to HMRC.

Do I have to pay tax if I trade through an overseas platform?

Yes, if you are a UK resident, all worldwide income is subject to declaration. Regardless of the platform, you are required to pay taxes in accordance with UK law.

Team that worked on the article

Maxim Nechiporenko has been a contributor to Traders Union since 2023. He started his professional career in the media in 2006. He has expertise in finance and investment, and his field of interest covers all aspects of geoeconomics. Maxim provides up-to-date information on trading, cryptocurrencies and other financial instruments. He regularly updates his knowledge to keep abreast of the latest innovations and trends in the market.

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Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.

As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).

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