Postby FigNewton » Sat Oct 23, 2021 1:22 pm
Since they do not define exactly where taxpayers must find the fx rate, HMRC is allowing taxpayer to choose any reasonable rate, provided it is done consistently. So when a broker includes an exchange rate in the contract note (AJ Bell, Trading 212) then I calculate my gains using that rate. When I sell a US share within a USD account without immediate currency conversion back to GBP (Interactive Investor, IBKR) then I figure the GBP amount using the Googlefinance() function in Google sheets to pull up for me the fx rate for the date.
Many brokers now like to boast of being "commission free", but then they have fx charges of 0.15%, 0.35%, 1% or even 1.5%. It would be better for tax if charges were organised the other way around, since commission is tax deductible from profits.
HMRC web page says:
You can deduct certain costs of buying or selling your shares from your gain. These include:
fees, for example stockbrokers’ fees
When AJ Bell charges 1.5% to convert USD to GBP, and I have no choice but to pay that cost when I use their platform, is this not a "broker fee"? It is certainly a profit-making activity for AJ Bell, as the real cost of providing the currency exchange is much less. Trading 212 charges 0.15% for fx and has said that they expect to make a profit on that small charge as their true cost is much less.