Taxation of Wise "interest", also Trading212

slinger2

I turned on the "interest" option in my Wise account last year and received £100 or so in 2023/24 (in pounds and euros). I've just received a tax statement for the year, 23 pages of it. This lists lots of acquisitions and disposals of the underlying assets. The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

sausage_time

I'm waiting for my USD "interest" statement.  I'm thinking this will also show as a gain?  I'm over the CGT limit for 2023/24 so will need to add this figure in.

masonic

slinger2 said:

The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

The latter two sound like taxable income. There is a section for income from gilts and deeply discounted securities (including P2P lending income) on tax returns and is taxed like savings and bond interest. Foreign income is taxed in the same way as UK, whereas foreign capital gains from investment funds are taxed as income (i.e. no favourable capital gain treatment) unless the funds paying it have UK reporting status.

IIRC Trading212 invests in QMMFs, so that income is bond interest.

Non-banks should be reporting the income, but whether any specific firm actually does is unknown until HMRC reveals the fact. Untaxed income of this nature should be reported by the taxpayer.

Futuristic

You are essentially invested into a money market fund, it is income tax and not CGT. 

Eg reply from HMRC themselves here: https://community.hmrc.gov.uk/customerforums/sa/0350bc45-2c17-ee11-a81c-002248c8c751

https://wise.com/help/articles/CrBCLj2oUKB2NWJC0G2i2/using-wise-interest-or-stocks-in-the-united-kingdom

sausage_time

I now have my Wise Tax Statement, and I'm a little puzzled.  I turned on "interest" for my modest USD amount during the financial year.  The statement shows no Income (which I kind of expected).  But instead of a gain I see a small capital loss overall.  Yet my USD balance is higher because of the "interest" on the account!

@masonic and @Futuristic - thanks for your comments above. I still can't figure out if this should be taxed as interest or (as you suggest) capital gain/loss.   The investment is BlackRock "IE00B45H7020 - USD Interest fund"

I have gains elsewhere so using this potential loss (if it is a loss) as an offset is OK, but I can't get my head around what's actually happening.  The amounts are small (~£10) so not losing much sleep over it, but I still find it troubling. 

masonic

The good news is that it is a UK reporting fund, so no concerns about income tax rates being applied to all gains (see list at https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds )

You will need to refer to the "excess reportable income" found documented by BlackRock here: https://www.blackrock.com/cash/en-gb/insight-and-education?productIdentifier=IE00B45H7020~BRSAHWJJ8~250972

This would be interest income and seems to be missing from your  Wise Tax Certificate. You will need to report it by multiplying the relevant income per share by the number you held on the record date and also deduct this from the overall gain. Perhaps this will equate to the capital loss Wise has told you about.

Rheumatoid

I just generated a statement from my interest bearing jars in Wise to show earnings added and declared that as interest. Not sure if that's the right way to do it but at least I declared it.

Aidanmc

masonic said:

slinger2 said:

The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

The latter two sound like taxable income. There is a section for income from gilts and deeply discounted securities (including P2P lending income) on tax returns and is taxed like savings and bond interest. Foreign income is taxed in the same way as UK, whereas foreign capital gains from investment funds are taxed as income (i.e. no favourable capital gain treatment) unless the funds paying it have UK reporting status.

IIRC Trading212 invests in QMMFs, so that income is bond interest.

Non-banks should be reporting the income, but whether any specific firm actually does is unknown until HMRC reveals the fact. Untaxed income of this nature should be reported by the taxpayer.

Where would the bond interest on Trading 212 QMMF's be recorded on tax return?

masonic

Aidanmc said:

masonic said:

slinger2 said:

The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

The latter two sound like taxable income. There is a section for income from gilts and deeply discounted securities (including P2P lending income) on tax returns and is taxed like savings and bond interest. Foreign income is taxed in the same way as UK, whereas foreign capital gains from investment funds are taxed as income (i.e. no favourable capital gain treatment) unless the funds paying it have UK reporting status.

IIRC Trading212 invests in QMMFs, so that income is bond interest.

Non-banks should be reporting the income, but whether any specific firm actually does is unknown until HMRC reveals the fact. Untaxed income of this nature should be reported by the taxpayer.

Where would the bond interest on Trading 212 QMMF's be recorded on tax return?

Assuming I understand correctly that these are also offshore funds such as Irish ETFs (you should confirm this), smaller amounts, sub-£2k when I last checked, can be added via the UK interest section, box 3 (untaxed foreign interest) using the GBP value. Otherwise you'd need to use the foreign pages. If UK domiciled, then it is box 2. The notes should guide you.

Aidanmc

masonic said:

Aidanmc said:

masonic said:

slinger2 said:

The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

The latter two sound like taxable income. There is a section for income from gilts and deeply discounted securities (including P2P lending income) on tax returns and is taxed like savings and bond interest. Foreign income is taxed in the same way as UK, whereas foreign capital gains from investment funds are taxed as income (i.e. no favourable capital gain treatment) unless the funds paying it have UK reporting status.

IIRC Trading212 invests in QMMFs, so that income is bond interest.

Non-banks should be reporting the income, but whether any specific firm actually does is unknown until HMRC reveals the fact. Untaxed income of this nature should be reported by the taxpayer.

Where would the bond interest on Trading 212 QMMF's be recorded on tax return?

Assuming I understand correctly that these are also offshore funds such as Irish ETFs (you should confirm this), smaller amounts, sub-£2k when I last checked, can be added via the UK interest section, box 3 (untaxed foreign interest) using the GBP value. Otherwise you'd need to use the foreign pages. If UK domiciled, then it is box 2. The notes should guide you.

Its hard to know what way to treat the 212 'interest'. Sometimes a percentage is in banks and some in QMMF.

I have some Euro cash also in 212 and its always showing as in banks 100%

masonic

Aidanmc said:

masonic said:

Aidanmc said:

masonic said:

slinger2 said:

The summary says that none of the £100 is income, it's all "Non-UK Gains/Losses" listed under "Capital Gains and Losses, Profits from Deeply Discounted Securities and Offshore Income Gains". I'm assuming from all this that the £100 counts as a capital gain, not as income.

Do non-banks like Wise report capital gains/income to HMRC?

Is the Trading212 "interest on cash" similar?

I'm a UK tax payer.

The latter two sound like taxable income. There is a section for income from gilts and deeply discounted securities (including P2P lending income) on tax returns and is taxed like savings and bond interest. Foreign income is taxed in the same way as UK, whereas foreign capital gains from investment funds are taxed as income (i.e. no favourable capital gain treatment) unless the funds paying it have UK reporting status.

IIRC Trading212 invests in QMMFs, so that income is bond interest.

Non-banks should be reporting the income, but whether any specific firm actually does is unknown until HMRC reveals the fact. Untaxed income of this nature should be reported by the taxpayer.

Where would the bond interest on Trading 212 QMMF's be recorded on tax return?

Assuming I understand correctly that these are also offshore funds such as Irish ETFs (you should confirm this), smaller amounts, sub-£2k when I last checked, can be added via the UK interest section, box 3 (untaxed foreign interest) using the GBP value. Otherwise you'd need to use the foreign pages. If UK domiciled, then it is box 2. The notes should guide you.

Its hard to know what way to treat the 212 'interest'. Sometimes a percentage is in banks and some in QMMF.

I have some Euro cash also in 212 and its always showing as in banks 100%

They should split out the bank interest in your tax certificate. But foreign interest would still be included in the same box as QMMF income, just UK interest would be combined with 'normal' savings interest.

The complexity is quite off-putting, which is why I decided not to use their unwrapped account (and had already invested my ISA allowance in more risky things).