Financing a full time dream...

[Antarcticarian]

Looking at the HMRC website - passive income (eg from rental,properties) would make you self-employed. If earning £12.5k you’d pay no income tax and about £500 in NI (£150 plus 9% of everything over about £8,600)

If self-employed you can make NI voluntary contributions which could be much less than £500 to ensure there are no gaps in your NI history or to ensure you achieve sufficient qualifying years for the state pension at retirement. To get a record of your qualifying years, go to GOV Gateway website.

 

[Ivory55]

Funny you can reduce it for self employed but paye zero hours don’t get this.

 

[Antarcticarian]

Okay. That's not a problem. Give me a couple of hours to figure out how to attach the file and for me to tidy-up the workbook and remove my data - I'll keep the food data in. Please note this is a simple workbook for full-timers with no other commitments ashore (no house, no car), those funsters with property and/or still working will need to adapt to their circumstances. I'll upload later this morning.

Hi Glas Robin. At the risk of baring my soul, please find attached the Excel Workbook for your and others' use. I've not removed my data so that this can be a benchmark to consider and adapt to your circumstances accordingly. There is also a 'Shoestring' table, but this is more sustainable than I'm prepared to bear. I have 'locked' many of the cells to protect the formulae, but have highlighted (light blue) those cells where you can enter text or data. If you want to over-ride this protection, you can unlock the worksheets or workbook using funster as the password. The 'Refit Plan' worksheet is completely un-locked. Hope this helps, but please all note I am a single person leading a mostly off-grid sustainable lifestyle.

 

[Silver-Fox]

If self-employed you can make NI voluntary contributions which could be much less than £500 to ensure there are no gaps in your NI history or to ensure you achieve sufficient qualifying years for the state pension at retirement. To get a record of your qualifying years, go to GOV Gateway website.

You may find gaps in payment history.
I have always paid NI from starting work either paye or se.

I have gaps in my history, no idea why but can only be down to the revenue department ?

 

[Charlie9038]

If you go the Ltd company route and pay yourselves a salary each month you will probably need an accountant for payroll etc, something else to consider in your budgeting ?

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[nicholsong]

Looking at the HMRC website - passive income (eg from rental,properties) would make you self-employed. If earning £12.5k you’d pay no income tax and about £500 in NI (£150 plus 9% of everything over about £8,600)

My opinion is that those NI rules may apply to professional landlords who manage several properties, but not to an owner who lets out their sole property when absent, e.g. holiday or working overseas.

Geoff

 

[Wellington]

If you transfer to a limited company, you must then pay second home SDLT on the transfer. I can’t remember the exact formula, but I worked out it would cost about 9k for a £200k house. If you need a mortgage, you must get a commercial one, and persuade a lender to lend to a new company with no credit history. If this is possible anymore (pre 2008 it was. I doubt it now) then they will certainly require a directors guarantee, which makes a mockery of the ltd part!

Property has a tax class all of its own, but the whole class 2 national insurance at £2 a week isn’t the whole story, there’s a percentage owed as well. Don’t ask me what, I always do my tax return in September, so it whole year since I wrestled with the Flaming Corridors of Hades, I’m, sorry, the Government Gateway. Doing the tax return is fine. Submitting it is a complete and utter pain in the proverbial.

 

[stevewagner]

Being a landlord of domestic property is no longer worth it in my view. Mortgage payments are no longer tax deductible and many other areas that were have also been removed. We have been offloading domestic property and are moving into the commercial market. Much better all round as you hold 3-6 months advance rent and if the tenant stops paying you can enter the property and take it back after only 3 weeks, unlike domestic which can take months and cost thousands. There are much better tax advantages in commercial property too. Our first commercial property is yielding 10% net!

 

[Glas Robin]

Ok, so dreaming has turned into active financial planning, costing and budget work.

Daft question I know, because it depends on characteristics of house/area, etc....

However, is there a rough rule of thumb between house value and rental potential? US sites I’ve looked at suggest rental income in the range of 0.8% to 1.1% per month is realistic.

Anyone aware of anything vaguely similar for UK properties? I’m thinking I can release a pot of £250kto300k to buy a property to let/as a UK base. It could be anywhere between Shropshire and Devon as we have family times in those areas.

 

[Silver-Fox]

Here’s a question for the property moguls.

Is it better to have three cheaper properties to rent that are mortgage free.
Or one property at the same value of the three mortgage free.

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[Glas Robin]

Here’s a question for the property moguls.

Is it better to have three cheaper properties to rent that are mortgage free.
Or one property at the same value of the three mortgage free.

Great question....and the next one on my list!

 

[Yorick]

However, is there a rough rule of thumb between house value and rental potential? US sites I’ve looked at suggest rental income in the range of 0.8% to 1.1% per month is realistic.

I always used 4% per annum as a rule and was always about right.

 

[Glas Robin]

I’m getting close to needing to put this in front on a qualified financial advisor, however one further general question if I may.

If I have an investment pot of say £300k in stocks/shares and it generates 3% growth per annum - say £9k, but I draw down (by selling units) £20k per year as income, I presume I still only pay income tax on the £9k since it is profit, not the full £20k which includes some of the original capital?

The original £300k pot will already have been taxed as salary or via CGT on property sale.

 

[stevewagner]

Here’s a question for the property moguls.

Is it better to have three cheaper properties to rent that are mortgage free.
Or one property at the same value of the three mortgage free.

Having 3 properties would spread the risk but as I have said previously in my opinion commercial property has a greater return and more tax advantageous.

 

[Silver-Fox]

Having 3 properties would spread the risk but as I have said previously in my opinion commercial property has a greater return and more tax advantageous.

I appreciate having three would spread risk, just wondered if the return was better ?

I think commercial has always been a safer bet has it not?

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[stevewagner]

I appreciate having three would spread risk, just wondered if the return was better ?

I think commercial has always been a safer bet has it not?

Even more so now due to the new rules on taxation in respect to domestic property rental.

 

[Charlie9038]

On our travels we have met a couple that do Holiday Lets in Cornwall & Devon, seems a better return than a 1 year lease, bit more hassle though, but there is management companies out there. However in Cornwall now it helps to be living there if your buying a property because they are trying to stop this.
Another option we have thought is mobile home parks, however there is a high management fee & some parks state that you have to buy a new one every 10 or so years! Someone is making a lot of money on these.
Personally I think that property & rentals have lost their growth, I think if I had £300k I would invest in ISAs & bonds for a safer option.

 

[XYL]

Thanks. NPA is, I think, 65. Earliest is 55 for part and 60 for the rest I think...

Robin if you were moved into the 2015 scheme I think your NPA will be your SPA for the rest.

Good luck. I agonised over my decision but left at 60 to enjoy life.

 

[XYL]

How have others found this transition? Do you miss being fixed to a place/community/people - or is this replaced by people you meet and maintaining online friends/communities?

Robin read Jay and Julie's blog "Why don't we full time" and they talk about "missed community" amongst other things.

 

[tonyidle]

Around here farmhouse rent is about£1500 a month ,land £100 an acre a year.

If only. I have around 40 or so acres in Cumbria on long term farm tenancy agreements. The rent has to be such that the farmer can make money. In total it brings in £3K pa.

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[Otter Spotter]

I’m getting close to needing to put this in front on a qualified financial advisor, however one further general question if I may.

If I have an investment pot of say £300k in stocks/shares and it generates 3% growth per annum - say £9k, but I draw down (by selling units) £20k per year as income, I presume I still only pay income tax on the £9k since it is profit, not the full £20k which includes some of the original capital?

The original £300k pot will already have been taxed as salary or via CGT on property sale.

First question I would ask is have you used your ISA allowance as any drawings From ISA are tax free, consider a single payment into personal pension. You entitled to pay in 100% of pensionable earnings as pension contributions plus carry forward of unused relief, so potential for investing £100000+ each then you can drawdown 25% tax free as income and using your annual allowances there’s no reason why you couldn’t be drawing all your income free of tax for a number of years.
as Qualified Financial planner this is bread and butter stuff I do for most of my clients.
look for an adviser who uses proper cash flow planning software such as Cash Calc, or Voyant these systems help visualise how long your money will last or not as the case may be.
i am not touting for trade, as I am about to retire, but I have been an adviser since 1980 and am happy to answer questions

 

[The Wino]

Not always that straightforward but I agree it's a good idea to see an independent financial adviser after coming to an agreed fee structure. We have someone we trust but it took a long time to find someone. In the past financial advisers had a bad reputation with a lot of hidden fees basically fees that were received from companies whose products they recommended often continuing forever despite no further action being required. It's a bit like investments that claim better than average returns why don't they only charge fees when they achieve them!!!

 

[Wellington]

Being a landlord of domestic property is no longer worth it in my view. Mortgage payments are no longer tax deductible and many other areas that were have also been removed. We have been offloading domestic property and are moving into the commercial market. Much better all round as you hold 3-6 months advance rent and if the tenant stops paying you can enter the property and take it back after only 3 weeks, unlike domestic which can take months and cost thousands. There are much better tax advantages in commercial property too. Our first commercial property is yielding 10% net!

That’s strictly true, but misleading. You can’t claim mortgage interest as an an expense, but you are credited the tax-equivalent back up to the higher rate by some complex and evil system (that’s actually fairly well explained if you follow the instructions). So if you're not a higher rate tax payer, you make exactly the same money as you always did. It’s only higher rate tax payers that are seeing yields fall.

I really must have another crack at a financial advisor. I’m sure a good one would have prevented some of the dreadful problems I’m having with mortgages at the moment. But the two I’ve seen in the past have been fairly hopeless, and my mortgage advisor hasn’t been very helpful, either. (To be fair, I’m not exactly run-of-the-mill, but hardly unique, I’m sure)

 

[The Wino]

That’s strictly true, but misleading. You can’t claim mortgage interest as an an expense, but you are credited the tax-equivalent back up to the higher rate by some complex and evil system (that’s actually fairly well explained if you follow the instructions). So if you're not a higher rate tax payer, you make exactly the same money as you always did. It’s only higher rate tax payers that are seeing yields fall.

I really must have another crack at a financial advisor. I’m sure a good one would have prevented some of the dreadful problems I’m having with mortgages at the moment. But the two I’ve seen in the past have been fairly hopeless, and my mortgage advisor hasn’t been very helpful, either. (To be fair, I’m not exactly run-of-the-mill, but hardly unique, I’m sure)

It also depends if you need a mortgage we are fully paid off so the loss of interest relief makes no difference.

 

[Otter Spotter]

Not always that straightforward but I agree it's a good idea to see an independent financial adviser after coming to an agreed fee structure. We have someone we trust but it took a long time to find someone. In the past financial advisers had a bad reputation with a lot of hidden fees basically fees that were received from companies whose products they recommended often continuing forever despite no further action being required. It's a bit like investments that claim better than average returns why don't they only charge fees when they achieve them!!!

Agreed it isn’t straightforward finding a quality adviser, be careful there are certain advisers who call themselves independent but are,nt, check their website and get their FCA no.then look at the FCA register. There are a number if National firms who are not independent, 1825, SJP, Quilter to name a few who are not.
all independent advisers can only charge fees for Pensions and Investment advice, though with your permission you can ask the recommended investment product provider to pay via the investment. The point is you and the adviser should have a conversation about how much the work will cost you and you decide how and how much you pay.

The great difficulty is that there is shortly to be 70,000,000 people in the country but only 23500 independent financial Advisers, so the good ones are having to become very careful who they take on as clients, they have to make a profit and clients with smaller sums to invest or that need managing are being priced out of the market, so they either end up just accepting product providers guidance (not advice) and providers are not known to be straightforward with their customer.

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