We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

calculating income from dollars to pounds with paypal

eld
eld Posts: 73 Forumite
Part of the Furniture Combo Breaker
Hi all, I am currently paid by Patreon in dollars. I am trying to work out how to correctly do my taxes.

I was just taking the amount in pounds paypal showed me when I withdraw it, but I understand that's wrong since you're supposed to use the official HRMC conversion rates (like the monthly one here for Jan 18 https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2018-monthly).

So what I'm now doing is:
Patreon payment = $1187.83 / 1.3406 (HMRC jan rate for USD) = £886.04

The problem is, the actual amount I get from Paypal is £852.82 due to their different exchange rate PLUS their currency conversion fee. They say their fee is currently 3.5% (i think?), so how do I work out the correct fee?

I assume I HAVE to note down the fee from Paypal when I withdraw, otherwise HMRC would probably cause me problems due to not noting my correct expenditure?

Anyone else getting USA payments dealing with this? I could use a hand.
Appreciate everyone’s advice here, keep up the great work!

Comments

  • As you say you should record your sale using the HMRC exchange rate on the relevant date.

    Once you have the final amount in your bank account you can account for the difference in your books as PayPal fees and exchange rate gains/losses. If you’re able to accurately calculate the PayPal fee I would record this as one expense and whatever the remainder is as a currency exchange loss.

    Both the PayPal fees and currency exchange loss are tax deductible expenses so they will reduce your taxable profit.

    Likewise you may sometimes make a gain on the currency exchange rate and these gains will offset any losses. If you make a net gain over the year you’ll pay tax on this additional income.
  • eld
    eld Posts: 73 Forumite
    Part of the Furniture Combo Breaker
    edited 26 January 2018 at 3:49PM
    Interesting.

    So I got $1,187.83 and Paypal converted it into £852.82 when I withdrew it.

    Using the monthly HMRC USD exchange rate of 1.3406 (from here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/670682/exrates-monthly-0118.csv/preview) the amount should actually be £886.04.

    I'm not really able to accurately separate the exchange loss from their currency exchange fee though, they don't actually list them in statements for currency conversion when withdrawing.

    So I can do £886.04 - £852.82 = £33.22 and take £33.22 as the fee for my expenses to cover the paypal fee and currency exchange loss?

    That would actually be correct for my self assessment taxes?
    Appreciate everyone’s advice here, keep up the great work!
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 347.2K Banking & Borrowing
  • 251.6K Reduce Debt & Boost Income
  • 451.8K Spending & Discounts
  • 239.5K Work, Benefits & Business
  • 615.4K Mortgages, Homes & Bills
  • 175.1K Life & Family
  • 252.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.