tax on foreign exchange gains

hermante

My uncle apparently changed a substantial amount of pounds to Australian dollars in cash a few years ago. He intended to bring it over to give to another relative, but this didn't end up happening. He recently changed it back to pounds making a profit of about £5000 from his original sum.

He is only resident in the UK and is near to the 50% tax band from his job. Does anyone know if legally he should be taxed on that profit?

Randvegeta

This below the CGT allowance so I don't foresee any tax due unless he has made any other gains in the year....

Cook_County

The gais is chargeable but below his CGT exemption.

He needs nonetheless to declare this on the capital gains pages of his tax return.

From 6 April 2011 foreign currency gains by individuals will be tax-free.

John_Pierpoint

Isn't the statement (if true) "Disposals less than 41,800, gains less than £10,600" sufficient?

Cook_County

John_Pierpoint wrote: »

Isn't the statement (if true) "Disposals less than 41,800, gains less than £10,600" sufficient?

Yes but to make a gain of £5,000 on currency transactions one would often assume proceeds would have been larger than £41,800...

John_Pierpoint

Woops I cannot multiply by 4.
Current value of AUD (say) 66p
value of AUD (nov09) (say) 54p
42,400/66*54 = 34,690
42,400 - 34,690 = 7,710
Possibly not quite as good as "investing" in gold.
No wonder the sales of Australian wine are falling through the floor.

Oh the joys of deficit financing and fiat currency quantitative easing in an economy that is 50% government spending.

Cook_County

ashleyingle wrote: »

The gain is from 'pure speculation'. profit/loss from exchange rate fluctuations i am 99% sure is not taxable.

It is subject to CGT currently if HMRC are correct. It will not be taxable from 6 April 2012 once the law has changed.