IB Multi Currency Account Question

[relictrader]

Hi,

I'm in the UK and am looking at using IB/API for trading US stocks. If i do this, please can someone tell me if i will have to pay a FX conversion fee on every BUY & SELL order?

Or, hopefully it is possible for me to fund my account in USD, so I only have a single initial FX fee?

Any advice would be really appreciated, as I've also been told having the account base currency in GBP is best for tax purposes? Can I have a GBP base account but also hold and use USD for stock purchases? If I do that will purchases via the API automatically go via any USD balance I have?

Thanks a lot!

 

[Varijotas]

You don't pay FX conversation fees, but your USD balance will show as negative, and interest is charged depending on the account aprox 1.5%
If you don't want to pay interest, you need to exchange GBP to USD for the amount you spent purchasing USD nominated stocks.

 

[HobbyTrading]

I'm in the UK and am looking at using IB/API for trading US stocks. If i do this, please can someone tell me if i will have to pay a FX conversion fee on every BUY & SELL order?

No, you don't pay FX conversion fee for each stock trade you do. Why? Because IB does not convert your money. This is why your account is called a multi-currency account: it keeps track of each currency separately. So your account can have GBP, USD, EUR, JPY and some other currencies, all at the same time. It is up to you when you want to convert cash from one currency into another. On negative cash amounts you will be charged debit interest, and on positive amounts you will be credited interest (although at the moment the credit interest rate is mostly zero). The rates can be found on IB's website: https://www.interactivebrokers.com/en/index.php?f=46385

Or, hopefully it is possible for me to fund my account in USD, so I only have a single initial FX fee?

IB tends to have better exchange rates than the general banks. So it would be better to fund your IB account with GBP and then convert to USD if you wish.

 

[relictrader]

Thank you, that makes perfect sense. While I'm here, if you do maintain a USD balance - is there a recommended way to take the GBP figures for tax purposes when trading US stocks from UK or does IB provide statements of that? i.e. I assume you need to log the GBP figure rather than USD at point of trade, is there a recorded or historical exchange rate you should use for this that's accepted for HMRC purposes?

 

[HobbyTrading]

Thank you, that makes perfect sense. While I'm here, if you do maintain a USD balance - is there a recommended way to take the GBP figures for tax purposes when trading US stocks from UK or does IB provide statements of that? i.e. I assume you need to log the GBP figure rather than USD at point of trade, is there a recorded or historical exchange rate you should use for this that's accepted for HMRC purposes?

I'm not familiar with the way how the tax office in the UK works. I assume that the tax office will tell you what exchange rate to use for amounts in a foreign currency.