This may certainly vary by country (and Iām not in the UK), but personally, unless weāre provided detailed records of the underlying investments, Iām planning to treat this new interest the same as the old interest on my taxes. I figure it shouldnāt matter what the service provider (Trading 212) is doing with the money behind the scenes and where theyāre getting the resources to fund the interest; Iām just holding money in an account and getting interest on my balance, not buying and selling instruments with it. (And I havenāt found any more obviously appropriate option in our tax code.)
Wellā¦
In some brokers, the customers are just holding their money in their broker accounts, but in fact they are buying and selling money market funds in the background when they buy or sell financial instruments, and the paid āinterestā is in fact dividends paid by the money market funds.
The interest you earn within your Invest account counts toward your Personal Savings Allowance. If youāre unsure how much you have left or what other interest is covered by the allowance, it would be best to reach your local tax office or check further with HMRC.
There is any place where says the details of the instruments source of the interest for each currency?
For example:
for currency x its the QMMF ABC (with link for the details in the asset manager site, such as, its domicile)
for currency y is a bank term deposit in country DEF (a mention to the bank would be very useful addition to transparency and peace of mind)
for currency z is ā¦
ā The reasons for this, are mainly taxation declaration concerns but also we as investors (and all financial stakeholders) should do their due diligence before investing in anything.
Just wondering what is the definition of uninvested cash, and weather there are restrictions, if I add 10x my current portfolio value is that considered uninvested cash?
Some years ago, while trying different online brokers before deciding on one, I had an account at Degiro. At the time they kept our uninvested money in MMFs, openly stating that it was possible to have negative interests. As a matter of fact, I believe I did lose a couple of cents when moving away from the platform because of said negative interests.
Now, I couldnāt help but wonder: is it the same for interest-bearing uninvested money in T212, which are invested in āQMMFsā? As a good internet user, I havenāt read the whole agreement term when accepting it. Does anyone know if negative interest is a possibility here?
The simple answer, is Yes.
The MMFs can have negative performance, it can include negative returns and also it can go bust (as seen during the Great Financial Crisis).
Now, one could ask if at the present moment its probable to happen. The most likely scenario is no. Due to Central Banksā monetary policy the interest rates are well in positive territory, in the past they were negative or near zero, as was the case for the EUR MMFs, illustrated by the Degiroās example.
That why, we need to know the MMFs details, because it can have risks, including counterpart risks, the asset managers that issue and manage the MMFs. Also bank deposits have counterpart risks, the banks.
Btw, the brokers that have uninvested cash interest program, with the use of bank deposits and MMFs, state their details and show the links to the MMFsā web pages and mention the banks used, so anyone could do their due diligence.