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making money from exchange rates?

(4 Posts)
ReasonablyIntelligent Fri 25-Dec-15 09:18:45

Hi all,
I live in work in Germany and keep a residence (rented) back in the UK where I visit friends and family once a month.
I have a UK current account as well as a German current account.
I use an online third party (P2P) service to transfer my salary (in Euros) to my UK account (in Sterling). The exchange rates are good and they only charge a £3 fee.
I'm fortunate enough to be able to put quite a lot of money into savings and so the amount of money I'm moving each month is growing.
I've noticed that I can take advantage of the fluctuating exchange rates and move my money between the two accounts when the rate is optimal. For example when the Euro was worth 69p I transferred my savings from my £ account to my Euro account and 3 weeks later that Euro had reached 74p so I moved it all back - essentially accruing 5% interest over the two transactions.

My questions is; this seems like a reasonably easy way to earn from moving money around. I see it as investing in the pound or euro interchangably. Obviously the risk is that one crashes whilst my money is tied up in that account.

Two questions; Is this legal? (So far I've only been transferring from my German account to my UK one, not back again)

Second question; What is the tax implication (in the UK - though in Germany too, if anyone is in the know) of the money that I have gained from this? Is it the same as stock/share investment return?

EBearhug Fri 25-Dec-15 09:28:51

That is basically how the currency markets work. Don't know if there are regulations for individual users though. Still, you could be moving money between accounts because you needed the money in the other country.

riksti Fri 25-Dec-15 09:32:55

It could be taxable to capital gains tax in the UK, depending on how you do it. If you just keep it within bank accounts then most probably not. See here for HMRC's manual covering the foreign currency gains topic:

ReasonablyIntelligent Fri 25-Dec-15 23:10:14

That's brilliant, thank you.

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