Are UK traders unsure whether profits from Bitcoin derivatives and CFDs are taxed as capital gains or as income? This guide focuses exclusively on Tax on Crypto Derivatives & CFDs to give concise answers and practical steps to report correctly to HMRC.
Trading derivatives on crypto can attract different tax treatments depending on facts and circumstances. Clear rules, checklists and worked calculations below reduce risk of an HMRC enquiry.
Key takeaways: what to know in 1 minute
- Tax treatment depends on activity: occasional investors usually face Capital Gains Tax (CGT), while habitual traders or market makers may face Income Tax on profits.
- Derivatives and CFDs often fall into Income Tax for active derivatives traders, but the exact test relies on HMRC factors such as frequency, organisation and intention.
- Report gains on self‑assessment if taxable: use the capital gains pages or include trading profits under self‑assessment if Income Tax applies.
- Keep robust records: HMRC expects trade tickets, platform statements, wallet movement evidence, and P&L computations for derivatives and CFDs.
- Deadlines matter: CGT must be reported within the year and certain disposal reporting deadlines apply; self‑assessment deadlines are strict.
How tax rules apply specifically to crypto derivatives & CFDs
Derivatives such as CFDs, futures and options on crypto do not always mirror the tax treatment of owning the underlying Bitcoin. The distinction hinges on whether the activity is an investment/disposal of a cryptoasset (potentially subject to CGT) or a trading/professional activity (subject to Income Tax and NICs).
HMRC guidance Tax on cryptoassets explains core principles, but the derivatives context requires applying established tests for trading status.
How to decide Income Tax vs capital gains for derivatives
- Frequency and volume: high‑frequency, large volume derivatives activity leans towards trading (Income Tax).
- Organisation: use of significant capital, staff, systems or automated strategies suggests trading.
- Intention and holding period: short holding periods and positions opened for price movement typically point to trading.
- Underlying exposure: pure speculative CFD positions often treated as trading receipts rather than disposals of crypto.
A simple decision tree helps determine likely treatment (see infographic and worked examples below).
When to report Bitcoin gains to HMRC
Report when a disposal or taxable profit arises. For derivatives and CFDs this can occur when:
- A CFD position is closed for a net gain.
- A futures contract is settled and results in a profit.
- Options are exercised or sold for a gain.
If the outcome is Income Tax (trading profits) the gains are included in a self‑assessment tax return for the relevant year and taxed at marginal rates. If CGT applies (investment disposals), the chargeable gain must be calculated and reported under CGT rules.
Examples of reportable events
- Closing a long CFD position on Bitcoin for a £12,000 profit — likely reportable as trading income if trading, or as a capital gain if an investor.
- Exercise and sale of a crypto futures contract for a net profit — similar treatment depending on status.
Understanding UK reporting thresholds for crypto disposals
For CGT: each individual has an annual capital gains allowance (annual exempt amount). Gains above that allowance are taxable. For 2025–26 the allowance should be checked on gov.uk each tax year — use the official figure when preparing returns.
Important points:
- Small gains under the allowance do not create a CGT liability but should still be tracked. If total proceeds exceed four times the allowance or other complex rules apply, reporting may still be required.
- Losses from crypto derivatives may be available to offset gains depending on whether they are CGT losses or trading losses; classification again matters.
Do I need to file a self‑assessment for crypto?
- If trading activity produces Income Taxable profits, register for self‑assessment and include those profits in the tax return.
- If capital gains from crypto disposals exceed the annual exempt amount, file a self‑assessment (or use the CGT on UK property service where relevant).
- If tax is already collected at source or income is below thresholds, registration may still be necessary where gains exceed reporting exceptions.
Registration steps:
- Register online with HMRC within the required deadline (usually by 5 October following the tax year for self‑assessment registration).
- Keep a clear separation of income vs capital calculations to support the return.
How capital gains allowance affects Bitcoin tax liability
The annual exempt amount reduces taxable CGT. Key practical points:
- Use the allowance where possible in each tax year to reduce tax on disposals. Splitting disposals between spouses can be a legitimate way to use both allowances, if legally justified.
- When derivatives are treated as capital disposals, the allowance applies to net gains after allowable costs.
- If classified as trading, the allowance is not directly relevant — Income Tax rules apply instead.
Worked example: simple CGT calculation for a CFDs investor treated as disposing of underlying
- Sale proceeds (or equivalent): £25,000
- Cost basis and allowable costs: £10,000
- Chargeable gain: £15,000
- Annual exempt amount (example): £6,000
- Taxable gain: £9,000
Tax due = taxable gain × applicable CGT rate (depending on total taxable income and whether gain is higher rate or basic rate band).
Record‑keeping rules and evidence HMRC expects for crypto
HMRC expects records that show:
- Date and time of each transaction or position opening/closing.
- Type of transaction (CFD, future, option), platform, counterparty.
- Consideration received and paid, fees, spreads and financing costs.
- Supporting statements or trade tickets from platforms and brokers.
- Evidence of transfers between wallets/exchanges where relevant to demonstrate acquisition/disposal chain.
Minimum retention period: keep records for at least six years from the end of the tax year to which they relate, as HMRC may open enquiries within that window.
Practical record‑keeping checklist
- Export and save CSV or PDF trade statements monthly.
- Keep contemporaneous P&L reports for derivative accounts.
- Record exchange rates used for conversions (use a consistent authoritative source).
- Maintain a reconciliation between platform statements and bank records.
Deadlines: when to report crypto each tax year
- Self‑assessment filing deadline: 31 January after the end of the tax year for online returns (paper 31 October). Payments on account may apply.
- CGT reporting deadlines depend: report gains on the tax return or use HMRC’s online service where mandated.
- Register for self‑assessment by 5 October following the tax year if required.
Missing deadlines can trigger penalties and interest. Where a taxpayer becomes aware of an error, use HMRC’s disclosure facilities to correct and limit penalties.
Practical decision tree: determine tax treatment for crypto derivatives
- Is the activity systematic, frequent and organised? → If yes, likely Income Tax.
- Are positions short‑term, financed and speculative with high turnover? → Income Tax more likely.
- Are derivatives used to hedge a long‑term crypto holding? → Could be CGT on underlying else hedge accounting may complicate.
- Is the taxpayer a professional trader with dedicated infrastructure? → Income Tax and NICs.
- Otherwise, treat as an investment and apply CGT to disposals.
Table: comparison — Income tax (trading) vs capital gains (investment)
| Feature |
Income tax (trading) |
Capital gains (investment) |
| Typical activity |
Frequent derivatives trading |
Occasional CFDs or holding underlying crypto |
| Tax type |
Income Tax and NICs |
Capital Gains Tax |
| Allowances |
Personal allowance may apply; no CGT annual exemption |
Annual exempt amount reduces taxable gain |
| Deductible costs |
Business expenses, trading costs |
Acquisition cost, allowable costs, base cost adjustments |
| Loss treatment |
Trading losses offset other income (subject rules) |
Losses carried forward against future capital gains |
| Reporting |
Self‑assessment as trading profits |
Self‑assessment CGT schedule |
Worked numeric example: CFD trader taxed under Income Tax
- Net trading profit for year (after fees): £60,000
- Less personal allowance (example): £12,570
- Taxable income: £47,430
- Income Tax due at applicable rates (basic/ higher) plus Class 2/4 NIC where relevant.
Contrast this with the CGT example above to see the material difference in tax charge.
Quick decision guide: tax treatment for crypto derivatives
🔎 Step 1 — Assess behaviour
Frequency, systems, automation → trading (Income Tax) ✦ Sporadic, long‑term → investment (CGT)
⚖️ Step 2 — Examine purpose
Speculation and leverage → likely Income Tax ✦ Hedging or holding → likely CGT
✅ Step 3 — Record and report
Keep trade tickets, platform statements and convert to GBP using consistent rates.
Benefits, risks and common mistakes
✅ Benefits / when to apply
- Applying correct classification avoids over‑ or under‑taxation and reduces HMRC enquiry risk.
- Using allowances and loss reliefs appropriately can materially reduce tax.
- Good records simplify compliance and support reasonable positions in the event of an enquiry.
⚠️ Errors to avoid / risks
- Misclassifying trading profits as capital gains (or vice versa) without evidence.
- Failing to include financing costs and fees correctly in cost base calculations.
- Inadequate conversion records for crypto→GBP transactions.
- Missing deadlines for self‑assessment and CGT reporting.
Frequently asked questions
When should I report profits from Bitcoin CFDs to HMRC?
Report when a taxable event occurs. If treated as trading profits, include them in self‑assessment for the tax year in which they arise; if CGT applies, report gains above the annual exempt amount on the return.
Do derivatives on cryptocurrencies always trigger Income Tax?
No. The tax depends on the facts: frequency, organisation and intention determine whether Income Tax or CGT applies.
How long should crypto trading records be kept?
Records should be kept for at least six years from the end of the tax year to which they relate, with longer retention advisable where disputes exist.
Can losses on crypto CFDs offset capital gains?
Only if the losses are classified as capital losses. Trading losses are treated under Income Tax rules; classification matters for allowable reliefs.
Is spread betting on crypto tax free in the UK?
Spread betting can be tax‑free for individuals, but professional treatment, business use or linkage to other taxable activities can change the position. Seek specific guidance and keep records.
What exchange rate should be used to convert crypto transactions to GBP?
Use a consistent, reliable source for exchange rates and record the source and rate used for each conversion. HMRC expects clear, auditable methodology.
Will HMRC accept broker statements as evidence?
Broker statements are essential evidence but should be supplemented with trade tickets, wallet records and P&L reconciliations to show the full chain of transactions.
Your next step:
- Register or update classification: determine whether derivatives activity is trading or investment and register for self‑assessment if required.
- Gather and centralise records: download platform statements, trade tickets and bank records, and reconcile them into a single spreadsheet or accounting system.
- Calculate and file: compute taxable income or capital gains using the figures and allowances for the tax year, and file before deadlines.