How to Make Passive Income Ideas Work for You in the UK
Looking for passive income ideas in the UK? Many people across the country add passive income streams to give themselves more flexibility, freedom and money.
While there are many different ways to earn passive income – some that require an upfront investment, others that require more initial time and work – it’s perfectly possible to generate a sustainable second income stream.
In this article, we take a look at passive income ideas UK. And explore how you can make passive income through property investment.
What is Passive Income?
Passive income is money you make without directly working for it. It’s from a source that is not an employer or contractor. And it can include many things. Such as stock dividends, writing a book and earning royalties or buying a property and renting it out.
Residual income models aren’t about getting something for nothing. Most passive income models involve work upfront to set things in motion. Maintaining your passive income may also require ongoing work along the way. For example, while most of the work will be done upfront, you may have to keep your product updated. Or if you’re a property owner, your rental property maintained in order to keep the money flowing.
Some methods of passive income will require more time or financial investment at the start than others. So when looking into passive income strategies it’s important to find one that suits your needs.
Things That are Not Passive Income
Passive income does not come from things you’ve been materially involved with. Such as wages earned from a job. Similarly, taking on a second job doesn’t count as a passive income stream. As you still need to show up and do the work to get paid.
Passive income is about creating a consistent stream of income that requires little work to get it. Assets like cryptocurrencies can be exciting and make you money. Although they require work, so do not fall under the umbrella of passive income.
What are the Benefits of Passive Income?
Earning a second stream of income without having to do much work for it is the dream of many.
Here are some of the benefits of investing in passive income:
- Extra Cash
Passive income is a great way to help you generate extra cash flow. Whether you’re trying to make some money on the side or creating a side hustle that can boost your earnings, having extra cash is always handy.
- Safety Net
Passive income can help tide you over if you find yourself in a bind. For example, if you suddenly become unemployed, and give you more purchasing power as inflation continues to rise. In good times, passive income can help boost your savings or be put towards something you’ve always wanted to do.
- Extra Security
Even if you have solid income coming in from your primary job, passive income can give you an extra safety net. With passive income you’ll always have money coming in. This can put your mind at ease if you’re worried about being able to save up enough money for retirement or want to focus on building wealth.
Easy Passive Income Ideas UK
If you’re looking for ideas for passive income UK, there are a multitude of different ways that people earn extra income. Here are just some of the easy ways you can create passive income.
1. Create a Course
If you have certain knowledge or skills that others would find useful, you can create passive income through an audio or video course. There are a number of sites like Skillshare and Udemy that can host your course. And once it’s launched you can earn cash from the sale of your product.
To build up your audience you may want to distribute content for free then begin to charge for more detailed information. You can use social media to demonstrate your expertise and deliver free content. Then you can attract those looking to go to the next level to paid content.
Creating a course does require a lot of upfront effort. You’ll need to have knowledge that others are willing to pay for. And also be able to put together a course that is high quality. As the competition is tough, to make money from it you have to put something out of a very high standard.
2. Write Book or E-Book
Writing an e-book is a good way to generate passive income. With a low barrier to entry and low publishing costs, you can leverage Amazon’s global distribution to get your book seen by a huge number of potential buyers.
E-books don’t necessarily have to be long. Short books focusing on a certain topic or skills can do well and are relatively cheap to create. Especially since you’re applying the knowledge you already have. To write an e-book you’ll need to have expert knowledge on a topic, and offer some skills or abilities that others perhaps can’t offer.
It’s easy to hire a designer to create the layout for the book. And you can also play around with price points and titles. The more value you have in your e-book the more likely it is to sell and draw in more customers.
A challenge with creating an e-book is building up a following. You’ll need to market your book. As well as get the word out about why it is helpful and why people should read it. Cross-promotion on other websites that have a good following can be helpful to build up your efforts at first.
One of the drawbacks of an e-book is that it can be a big sink of time if it doesn’t sell. It requires a lot of upfront work and there’s the possibility of spending a lot of time on something with little reward.
3. Flip Retail Products
Flipping products by selling those that you find at reduced prices elsewhere is another way to earn passive income. Many people use sites like eBay or Amazon to sell discounted merchandise and make a profit. This works well if you are able to find valuable merchandise for reduced price. Over time you may be able to build a loyal following who keep an eye on the deals you offer.
While this strategy can be passive, in that you can sell things online any time, it does require a lot of work. Especially to find good deals and source in-demand products. You’ll need to have cash to invest in buying the products in the first place. So this requires some investment. Similarly, it can be tricky to sell at the right price. Sell too high and it’s unlikely that people will want to buy your products. If the price is too low it will be hard to make profit. You’ll need to be able to sell products at a sweet spot to make it worth your time and effort.
4. Sell Photography
Selling photography is another passive income idea in the UK. While it might not be for everybody with a camera, Shutterstock and Getty images allow people to be approved by the platform. Then they can licence their photos to whoever downloads them. With each download, the platform will pay a fee.
Platforms like Shutterstock and Getty are well known. They give you an opportunity to scale your efforts should the photos you upload be in demand. Photos for these sites can be landscape, portrait, shot with models or be real-event-related images. Popular photos can be sold hundreds of thousands of times meaning there is no ceiling on your revenue.
However, if your photos are not popular or in demand you may struggle to generate any sales.
You’ll need photos that appeal to a specific audience or that represent a certain scene, and be willing to tease out where the demand is.
There’s still a significant amount of time needed to be successful in this passive income stream. You’ll need to go out and take photos, keep adding photos to the relevant platforms. As well as know how the platform’s search algorithm works in order to ensure people can find your images.
5. Dividend Stocks
If you’re a shareholder in a company with dividend-yielding stocks, you’ll get a payment at regular intervals. Usually, companies pay dividends on a quarterly basis. As long as you own stock you should get this payment – the more stock you own the higher the payout.
To earn dividends from stock all you need is the initial payment to purchase the stock, making this a relatively straightforward way to earn passive income. The most difficult part about earning passive income through dividends is that you need to choose the right stock. To be successful you’ll need to look for well-performing, profitable companies.
Before investing in any dividend stock, you’ll need to investigate each company’s website and financial statements. It’s important to thoroughly investigate each company, which can take weeks to do. Companies with a very high dividend may not be able to sustain it, but too low and the stock won’t deliver on the passive income you are looking for.
Alternatively, you can invest in ETFs which hold stocks, commodities and bonds but trade like stocks. EFTs diversify your holdings and are relatively inexpensive. A downside is that during times of uncertainty companies may cut their dividends entirely.
6. Rent out a Parking Space
There are plenty of smart passive income ideas. If you have a driveway or parking space that you don’t need, you could rent it out to someone else to make passive income. In busy areas, where parking is in high demand, your parking spot could earn you decent money. The more space you have the more cars you can fit to earn passive income.
Commuters or families with children, who may need a parking space throughout the day or during the school run several days a week are an ideal target market. You have the option to rent out a space on a weekly or monthly basis to generate regular passive income.
The downsides of renting out a parking space are that you may need to ensure you have a disclaimer of liability to make sure you are not held accountable for any damage. You should also check with your residence terms to avoid violating any rules.
7. Rent out a Room
Sites like Airbnb make it relatively easy to earn passive income. Especially from tourists and holiday-goers looking for unique or more affordable accommodation in destinations worldwide. By renting out part of your home you can earn rental income on the side without having to invest in a new property.
The UK’s rent-a-room scheme lets you earn up to £7,500 per year tax-free. Meaning you could save money when renting out a room. The only downside is that you may not be able to earn money in the off-season. Also, there may be more wear and tear to your property. It may be hard to rent out your room if you don’t live in a popular tourist area.
Renting a room is an easy way to get passive income, and if you already have the facilities you won’t need to refurbish. Downsides are that you will need to check that your mortgage allows for a lodger. And it may mean more wear and tear if your home has extra inhabitants.
8. Rent your Home Short-Term
If you are going away for a period or time or have the ability to rent out your home for certain parts of the year, this can be a great way to earn passive income. For example, if you want to travel over the Summer, you can rent out your home when you are gone.
Plenty of websites give the ability to list your property for rent. If you live in an area that is popular with tourists, or commuters this can be a great way to keep your property earning money. The only downside is that there are some risks with letting someone into your home. Such as wear and tear and security issues. So you’ll need to make sure you properly vet those that will move into your home.
Best Passive Income Ideas UK
Now you’ve got some passive income ideas UK, which is the best source of passive income?
The best source of passive income will depend on several factors. Things like the amount of money you have to invest, the size of the opportunity, the competition, your level of knowledge and the potential to succeed should all go into weighing up the pros and cons.
Passive income ideas with the lowest barrier to entry tend to be the most competitive. This can make it harder to make money. However, if you have an interest in what you are doing or niche knowledge, you’re more likely to stay motivated to make it work.
Another factor to consider is whether you have money to put into your passive investment or have no money to start.
- If you have no money to invest
Is it possible to make passive income with no money? If you have no money to start your pursuit of passive income, it’s most likely that you’ll need to invest your time in order to make a start. If this is the case, it’s likely that you need to look for passive income ideas where you have an area of expertise. In order to build a course, book or product for customers. Often passive income investments that require no money require more time or work. It’s likely you’ll need to substitute your time for lack of capital, until you get enough capital to expand.
- If you have money to invest in passive income ideas
If you have some capital to invest in your pursuit of passive income, it’s more likely that you can target higher-income-generating opportunities. For example, if you choose to invest your money in dividend stocks, you can leverage the money you have with little or no effort. You could also pair your money with a time investment to move into more lucrative stocks or income-generating avenues that require more research and time but can be quite profitable.
How Many Passive Income Streams Should I Have?
It’s always a good idea not to put all your eggs in one basket. The number of income streams you should have will depend on the amount of time you have, your financial situation and your financial goals. The more income streams you have, the more opportunity you have to generate profit from them. Rental properties, business ventures and dividend stocks are all great ways to diversify your income stream.
If you have multiple revenue streams, you’ll want to make sure that more of your time and effort is going into those that are making the most income. You’ll want to balance effort with opportunity so you’re choosing the right passive investments for your time.
How Can I Make Money from my Property in 2022 UK?
While some of the points listed above can make great ideas for second income, one of the most effective passive income ideas UK is investing in rental property. Property is continually ranked at the top of lists outlining the best place to invest money. While not completely free of work, taking the right strategy can make it a highly profitable source of income.
To earn passive income from property, you’ll need to calculate the property’s total costs and expenses, how much return you want to make on the investment and understand the financial risks that come with owning a property.
In order to calculate the amount of passive income you can make from a property, you should calculate the rental yield. Rental yield is the rental return an investor will achieve on a property on an annual basis. To calculate the rental yield, divide the rental income by the price paid for the property, then time by 100 to get a percentage.
What is a Good Rental Yield?
The higher the rental yield the better, as it means you’ll have more income to cover your property’s expenses. Investors usually aim for something above 5%, but 8-10% is usually more ideal.
You’ll want to find high-growth areas where there are strong capital growth projections. The amount you can earn in rent should cover baseline costs to keep the property, such as the mortgage, bills and things like insurance and fees.
There are a few risks with investing in rental property, such as what will you do if you cannot rent out your property? What if you get a tenant who refuses to pay? In periods of economic downturn, you may not be able to rent out your home for as much as before and mortgage rates are rising which means the price of maintaining your property may increase. It’s important to have a contingency plan should things take a turn for the worse.
That said, if you choose the right property in the right area, it’s possible to make strong yields and a good return on your property. If you’d like more info on What is a Good Rental Yield read this article.
You might also want to consider different demographics of the market:
- Student Properties
Student property in particular is known for having yields that can be up to 20% more than the average property due to the ability to rent out multiple rooms to tenants and lower property prices. As a student landlord you’ll need to take into consideration other aspects such as vacant periods over the summer, as well as how to advertise the property and wear and tear costs, which might be higher than usual.
- Off-Plan Properties
You can maximise rental yield by investing in an off-plan property. Off-plan properties are often sold at reduced rates because the drawback is that you’ll need to wait for the property to be completed, but it’s certainly possible to secure an excellent deal.
Residential off-plan properties are usually located in city centres. These properties can be great for landlords looking to target young professional demographics who look to appealing locations. Capital growth with residential off-market properties tends to be high due to their appealing location in fast-growing cities. Because off-plan properties are usually bought for a lower property price, rental yields can be quite strong.
How Can I Make £1000 a Month in Passive Income?
One of the best forms of passive income is investing in real estate. Investing in a buy-to-let property can give you a form of monthly passive income through rent. At the same time, owning a property gives you the chance to make capital gains as the property increases in value overtime.
Investing in real estate is one of the best investments you can make. Currently, UK rent is the highest it’s ever been, with an average of over £1,000 per month. People will always need a place to live and with property prices at record highs, more people are renting for longer in order to save up for house deposits.
Another benefit of investing in real estate is that it can be completely passive. You can hire a property management company to take care of all the duties you would have as a landlord. The only barrier to entry is that you will need a lump sum in order to purchase a property.
While house prices reached record highs in 2021 and 2022, you can still purchase property for well below this price point. Buying off-plan property or a property in an up-and-coming area means you can start investing with a much lower price point. Read our guides on how to get the best return on a £50,000 investment and the best way to invest £100k.
What are the Benefits of Investing in Real Estate?
We think investing in property is one of many good ideas for second income. If you’re looking at this means of investment, here are the main benefits.
- Monthly passive income:
Each month you can get passive income in the form of rent from tenants. By hiring a property management company you can make this completely passive with little to no work involved at your side. If you have the time and inclination you can manage the property yourself.
While earning one property means you can achieve monthly passive income, by investing wisely and growing your portfolio you can double or triple your income by owning multiple properties, read our tips on how to grow a property portfolio in 2022.
While there is still research to be done, the key principles of investing in property are relatively easy to understand. You’ll need to know your responsibilities as a landlord and stay up to date with any property codes.
- Two Types of Return
You can earn two types of returns, both rent and capital appreciation which is usually not the case with other types of passive income ideas.
- Steady Performance:
Even in times of economic uncertainty, property is one of the safest places to put your money. While house prices can drop, they do tend to rise when taking a long-term view. People will always need a roof over their heads and rental property will always be in demand.
Ways to Make Passive Income with Property
If you’ve decided that making passive income from property is the way to go, here are some of the avenues you can choose to make money.
One of the most popular methods of making passive income from property in the UK. Investing in buy-to-let can be a great form of income generation. A relatively simple process, generating monthly income from buy-to-let sees you purchase a property and rent it out to tenants who then pay monthly rent.
The most popular type of property is residential, but landlords can invest in commercial property too or even look to short-term strategies such as holiday lets or Airbnb. Residential property letting is usually the most popular option because it delivers consistent returns all year round. Because investors benefit from ongoing monthly rent and capital growth, it can be a great way to boost your income and have a nest egg for the future.
To optimise your passive income from rental property, it’s advisable to buy property where prices are low but rents are high. This will help youtube get the best yields for your investment.
What are the benefits of buy-to-let passive income?
- Once you know how to set up your property and how best to make money, you can generate regular and guaranteed rental income.
- As well as monthly rental income your property is likely to increase in value giving you a cash lump sum when you come to sell it.
- If you don’t want to manage the property you can hire a property management company to handle it for you.
What are the drawbacks of buy-to-let passive income?
- If you cannot find a long-term tenant for your property this could result in loss of income.
- Rental yields and capital growth vary depending on the property and area you invest in.
- Take in a Lodger
Renting out one of the rooms in your home by taking in a lodger is another way to generate passive income from property in the UK.
The UK government rent-a-room scheme lets you earn £7,500 per year tax free from renting out a furnished room in your home. To qualify for the allowance you must live in the property with the lodger at least some of the time. If you earn more than this amount from renting out your room, you’ll need to complete a tax return and pay any due tax on the remaining income.
You’ll need to let your insurance company and mortgage provider know what you have taken in a lodger. You don’t need to own the property to rent out a room. Although, you’ll need to check the rental agreement with your landlord as sometimes subletting is forbidden.
- Rent out your Parking Space or Driveway
In many places, garages, off-street parking or driveway space is in demand. And it’s possible to rent it out by the hour, week or month. A number of websites like JustPark and YourParkingSpace allow you to advertise your parking spaces and usually charge a commission on each booking.
For those that live near commuter hubs, railway stations or attractions like sporting grounds or an airport, where parking is a premium, it’s possible to generate a decent amount of cash if you have the right space.
- Rent out Storage Space
If you have a spare space in the garage, shed or attic, you might consider renting it out to someone who needs to store their belongings. Websites like Storemates can help you to advertise the dimensions of your space and list the monthly cost. While not a huge money maker, you can earn around £1000 per year. That’s on average from renting out unused garage or loft space.
- Rent out a Room as Office Space
With more of us able to work from home, not everyone has the space they need for a home office. Websites like OfficeRiders let you rent out a space for £85 to £450 a day. Those with outdoor space like garden offices or homes that are unique and can be used for photography shoots for example can earn good money. Those with large free space might catch the eye of startup companies.
If you’re looking for passive income ideas UK, we think you can’t go wrong by investing in property. Whether you look to buy-to-let or rent out a room, making passive income from property can give you more freedom, flexibility and money. If you want to know more about generating passive income from property, get in touch with our experts today.