Thanks a lot. I appreciate it.
Thanks for the reply.
So, only the interest must be reported. I don't have to report compensation I received from the Central Bank as far as I understand.
Okay, got it.
In Turkey, there is a specific savings account known as the 'Foreign Currency Indexed Fixed-Term Deposit Account.' These accounts are designed to safeguard the value of the deposit against fluctuations in foreign currency exchange rates. I also have funds in these accounts. Should they be reported in the same way as traditional accounts?
Let me illustrate how they operate with an example. Suppose I deposited 1000 Turkish Lira into the account. The account is indexed to USD, and the TRY/USD exchange rate at that time is 10, meaning 1000 TRY equals 100 USD.
At the end of the fixed term, I earned 100 TRY in interest. However, by that time, the TRY/USD exchange rate increased to 12, causing my deposit to lose value against the USD. Including the interest, the total amount is now 1100 TL, equivalent to 91.67 USD. Recognizing the loss in value, the Central Bank compensates me with 100 TL as an exchange rate difference, bringing my total to 1200 TL, which equals 100 USD (exchange rate = 12 at that time).
How should this be reported to HMRC?"
Thanks for your reply.
I have a follow-up question. You said that the interest must be declared when it is converted to pounds. So, I shouldn't be declaring it yet, if it still stays as Turkish Lira, right?
I currently have funds in a savings account in Turkey where I earn interest. However, my capital is experiencing a depreciation compared to the pound.
Allow me to illustrate with an example:
Let's consider that I transferred £10,000 to Turkey, converted it to the local currency TRY, and opened a savings account. At the end of a given term (be it 6 months or 1 year), I earned interest in TRY equivalent to £100. Yet, by the conclusion of that term, the TRY lost value against the pound, resulting in the depreciation of my initial capital to £9,700. Although it may seem like I earned £100 in interest, in reality, I incurred a loss as the total value of my funds decreased to £9,800 (£9,700 main + £100 interest).
In this scenario, what is the interest earned that needs to be included in the Self-Assessment.