I am a UK citizen resident in Ireland with most of my savings in sterling (GB£) deposits both onshore and offshore. Given the uncertainty of sterling after the Brexit vote, can I switch a proportion of those GB£s into profitable and secure US$ bonds, e.g. US Treasury bonds?

By "profitable" I mean investments that will not incur high US tax liabilities or large GB£->US$ exchange costs?

  • Exchange costs vary over time and depend on how you are doing the exchange; see other Questions for discussion of that topic, I think. Note that exchange rate also varies over time. – keshlam Oct 2 '16 at 19:58
  • Like @keshlam says the rate fluctuates based on the market, and fees charged vary according to the financial institution, over time and with the size of the transaction, and are subject to variation based on customer standing with the bank. Depending on the size of the transaction and how much business you have with the financial institution, you may also be able to negotiate the fees lower as well. – Xalorous Oct 5 '16 at 13:56

As you imply knowledge of in your question, doing what you propose is a long-term currency bet on the strength of the USD relative to GBP. As such, any question of profitability should be dominated by the relative exchange ratio of GBP/USD over your holding period of USD-denominated assets if your doing this right. For example, assuming your considering either a large enough capital position or a large enough rate change, both combined with relatively low fees.

As to exchange costs and fees, I agree with @keshlam's comment to the question. But I'll add that these costs also vary depending on how you go about doing the exchange too. Can you just buy US bonds in your current UK broker? What are their policies on currency conversion to do so? Or are you thinking of actually separating the currency conversion from the trading of bonds, perhaps by opening a US brokerage account separately? If the latter, you should be able to use one of the many low-cost, independent (non-bank), online, currency exchangers. These generally have lower fees than banks -- which could save you thousands of £/$! Another alternative is to see if your broker will allow you to trade FX at reasonable costs. Mine does, I pay $2 commission for a GBP/USD trade at market spot rate with a <1 pip spread, and only have very minor restrictions on deposit and withdrawal abilities. Much much better than a bank! And much cheaper than my broker's policies if they do the conversion themselves too.

As to taxation, the US and UK have a taxation agreement so that you won't be double-taxed on any profits from your investments (coupon payments on your bonds during your holding period, capital gains when it comes to sales of your bonds.) And the US rate is actually lower than the UK rate, though you may not have a choice in which you have to pay. Anyway, my point is that you shouldn't incur "high US tax liabilities" as compared to your existing GBP holdings.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.