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The Independent
30-04-2025
- Business
- The Independent
Four ways to invest in property without becoming a landlord
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. The appeal of managing your own buy-to-let portfolio has been hit in recent years with increased taxes and restrictions on reliefs that have dented landlord profits, as well as increased regulations. The Renters' Rights Bill currently going through Parliament will also introduce tougher requirements to evict renters and limit mid-contract rent rises. All this is driving many landlords to exit buy-to-let. But the returns from property can still be attractive, especially compared with volatile stock markets. Luckily, there are ways to invest in property without the added responsibilities and headaches of being a landlord. Here is what you need to know - with plenty of options to start smaller than having enough for a full house deposit. From housebuilders such as Persimmon to property websites such as Rightmove, there are plenty of listed companies on the London Stock Exchange in the housing sector that you could put money into. You would then share in their success if the share price grows and if they pay dividends. Of course, you will also lose money if their share price drops. There are extra responsibilities with shares though. You will need to build a diversified portfolio across different sectors so that you don't lose all your money if the property sector crashes. There may also be fees to pay for holding your shares on an investment platform, which can eat into your returns. Property funds If you don't have the time or confidence to research shares, you can get exposure to the property market through property funds. These are run by fund managers who will build a diversified portfolio typically invested in commercial properties such as offices, warehouses, industrial units or shopping centres – rather than housing. Some will either invest across a mix of property sectors, others special in a narrow part of the market or a particular region. Jason Hollands, managing director of investment platform Bestinvest, said: 'Physical property funds offer investors diversification beyond equities and bonds and a stream of rental income can be useful for those who are retired. 'With many people already having significant exposure to residential property through their own home and mortgage, investing in a commercial property funds provides a slightly different dimension. Here they can benefit from the security of long leases by business tenants and accompanying rental income.' When choosing a property fund, Hollands said the quality of the tenants and the length of their unexpired leases - the longer the better - low vacancy rates and the exposure to attractive locations are important considerations over portfolio resilience. One big risk though is that property is an illiquid asset so you cannot sell in a hurry in the way you could decide to ditch some shares. Hollands added: 'A fund can't part-sell an office block or warehouse it owns and in times of uncertainty this may be difficult to achieve at a reasonable price. Open ended property funds have therefore experienced periods in the past when they have had to suspend dealing – the ability for investors to take their cash out – when large numbers of investors want to take their cash out at the same time. 'Even in stable times, such funds have to hold significant cash balances to address day to day demands for possible withdrawals which can water down returns.' There are also investment funds and exchange traded funds that invest in property stocks. Both types of property fund will have manager and platform fees to consider. An alternative to property funds are real estate investment trusts (REITs). This is a type of investment trust - backing a mix of commercial properties - that is listed on a stock exchange. Rather than your money going directly into properties, you are purchasing a share in the trust and share in the ups - as well as the downs - of its share price and market performance. Many REITs also pay regular and attractive dividends, often quarterly. Nick Britton, research director of the Association of Investment Companies (AIC), said: 'Being a landlord isn't for passive income – you will find yourself running a property business, grappling with complex tax, legal and regulatory requirements. By contrast, investing in a REIT is as easy as buying any other share. 'A particular perk is that REITs are very tax-efficient – there is no tax to be paid by the REIT itself, so if you hold REIT shares in an ISA or pension you'll effectively receive rental profits tax-free. 'Although you can sell the shares at any time, REITs should still be seen as a long-term investment. Their share prices will fluctuate and when the property market is in the doldrums, this will be reflected in the prices. You need to be patient and ideally take a five to 10 year view.' Property funds and shares can be held in an ISA, so any returns can be taken tax-free, unlike direct rental income. Peer-to-peer lending You could also fund buy-to-let or development loans directly through peer-to-peer lending platforms such as Kuflink and LandlordInvest. These can offer double digit returns for funding landlords or developers directly. However it can also be more risky and you need to check the P2P lending platform is regulated by the Financial Conduct Authority (FCA). Risks include borrowers falling into arrears and even defaulting, potentially leaving you with nothing. There is also no Financial Compensation Scheme (FSCS) protection if a platform goes bust. There are also platforms such as TAB Property that provide fractional ownership of assets such as hotels and office spaces, as well as residential property. Any returns earned from a property's income will be paid in proportion to your stake. Duncan Kreeger, chief executive of TAB Property, said: 'Fractional ownership now allows investors to enter high-grade real estate markets without the usual high minimum investment thresholds. This approach diversifies exposure and mitigates the risk of putting all your eggs in one basket. 'For anyone considering this type of diversification, my advice is to start with a clear investment plan. Determine your investment horizon and desired returns. Look for platforms offering access to diverse asset classes and conduct thorough research on each opportunity. 'Understand the terms, risks, and potential rewards associated with your chosen investments.' When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
28-04-2025
- Business
- The Independent
Five expert tips on how to manage your money when you're self-employed
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Are you feeling the pinch as a self-employed worker? If so, you're not alone! Taking control of your finances can feel like a tough ask when your income is unreliable. And according to data from the Institute for Fiscal Studies (IFS), about a quarter of self-employed Brits have total wealth of less than £10,000, while more than half have nothing saved in their pension. But the good news is, there are plenty of simple ways to help you get your finances on the right track. Build a budget Being self-employed can sometimes feel like juggling in the dark. You don't know how much money is coming in and how much you have to play with. But setting a simple budget is crucial if you want to stay on top of your money. Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, says that budgeting is especially hard when your income is variable. She suggests drawing up a monthly spending budget based on a lean month. 'This ensures that when times are tighter, you can still cover the cost of the essentials,' Ms Coles explained. 'Then, in the better months, you can set aside money to spend on nice-to-haves, annual things like holidays and Christmas, and pension top-ups. It means too many lean months will result in a frugal Christmas rather than a missed bill.' Save for your tax bill It might not be exciting, but staying on top of your tax is vital when you're self-employed. Unlike employees, tax isn't collected automatically and it's up to you to set aside the right amount. It can feel like a double-whammy in your first year because money owed for the tax year ending April 2025 is due by 31 January 2026. But this payment is shortly followed by a 'payment on account' for the next year. You're effectively paying around 18 months' worth of tax in one go. Ms Coles says it's worth estimating your tax band and saving this percentage of your income each month. 'This simple rule of thumb should mean you will tend to save slightly too much - because you won't pay tax on the first chunk of your income, and will only pay higher rates on a slice of your income. This will leave you options for saving, investing or spending at the end of the year.' Have a cash buffer Saving a decent cash buffer is a must when you're self-employed, as it will help you sail through any tight periods. Most experts recommend aiming for enough cash to cover three to six months' worth of essential spending, but you could need more if you're self-employed as a few quiet months could see your savings quickly eroded. Again, basing your spending on your worst months and setting aside cash when you have a good month can be a great way to build up savings. Once you have some savings, it's well worth shopping around for the best interest rates, which vary significantly on cash savings accounts - you'll often get the best rates with a savings account with limited withdrawals. Get life insurance Joining the ranks of the self-employed means leaving behind the perks enjoyed by employees - and that includes life insurance, which often comes automatically with a workplace pension. In return for paying a regular monthly premium, life insurance will typically pay out a lump sum to your loved ones when you die. Getting some cover in place doesn't have to be expensive and can be a massive weight off your mind. Last, but not least. Saving for retirement is crucial, but tricky when you're self-employed. With no access to a workplace pension, the onus is on you to provide for the future. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown says that although self-employed workers don't have a workplace pension, they do have several other options. 'Pensions are extremely tax-efficient, but many self-employed people may be hesitant to lock their money away until at least the age of 55 in case work dries up and they need extra cash,' she said. ' ISAs can offer flexibility in that you can access the money if needed and any income taken is tax free. However, for those aged under 40 a Lifetime ISA (Lisa) is another option that could really boost retirement savings. 'You can contribute up to £4,000 per year to a Lisa and receive a 25 per cent government bonus - a valuable boost to your savings and it also has the same effect as basic rate tax relief on a pension. Any income taken from the Lisa post-60 is also tax free so it can prove to be a compelling prospect for self-employed people paying basic rate tax.' You should always make sure a Lisa is the right product for you though, given restrictions on use and penalties for withdrawing the money for other reasons. Whichever product you use, don't let your retirement take a back seat until it's too late. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
28-04-2025
- Business
- The Independent
Boring investing could be your route to stock market riches
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Financial headlines are dominated by market surges and downturns, which can make investing feel more like a game of Russian roulette than a serious way to build your wealth. But the good news is that you don't need to be the Wolf of Wall Street in order to be a successful investor. In fact, there's plenty of good evidence to suggest that being a boring investor, by simply and slowly drip-feeding small amounts and (almost!) forgetting about your investments, could give you better returns in the long run. Get familiar with pound-cost averaging Cost averaging is when you put in a fixed amount of money into your investments at regular intervals, such as once a month, regardless of how the markets are performing. With this method, you reduce the risk of inadvertently investing a large sum at the wrong time - such as when the price of a fund or share reaches an all-time high, only to fall sharply soon after. For example, if you put £250 a month into a diversified index fund for 40 years, assuming an average annual return of five per cent after fees, the value of your investment could rise to over £364,000. The dollar-cost averaging strategy allows you to buy more shares when the markets are down and fewer shares when the markets are up - reducing your exposure to short-term volatility. Understand the magic of compounding Compounding is when money makes money. In technical terms, it continues to earn interest on previously generated interest. While your investments will never grow in a perfect linear fashion, in the long term, your investments should continue to generate their own earnings. For a full guide to compounding and how it can grow your wealth over the long term, read here. As a short example: £1,000 growing by one per cent becomes £1,010 The next one per cent growth applies to the new total not just your initial investment This gives you £1,020.10, not just £1,020 It's a small change first of all, but over time, this compounding effect accelerates growth - especially when your annual returns are higher Avoid being an emotional investor No one wants to see the value of their investments plunge during a market downturn, such as as a result of the recent Trump tariffs. But remember that short-term price fluctuations are often fuelled by speculation and uncertainty. Unfortunately, sometimes emotions can get the best of us, and some investors may feel compelled to sell everything at a loss if they fear the markets may get worse. History shows us that markets tend to recover over time; however, timing the market and identifying when prices will rebound or fall is impossible, no matter what anyone tells you. In the words of Warren Buffett, one of the world's most successful investors: 'Until you can manage your emotions, don't expect to manage money.' Cut out the noise As we alluded to earlier, short-term price movements are strongly influenced by speculation and what is referred to as herd behaviour. For example, if all your friends are telling you they are going to invest in a particular stock, you might be tempted to do the same. On a larger scale, this can dramatically increase the share price, only for it to fall quickly again when people start selling. The economic fundamentals of a share or a fund matter much more for your long-term returns. For example, as long as your money is invested in companies with good track records of investment returns, stable leadership and strong long-term growth prospects, there's little point in worrying about short-term volatility. What the research shows about 'boring' investing Research from Vanguard shows that the long-term performance of index funds - such as those that track the S&P 500 - is easier to predict than active funds. The latter seek to outperform the market but may underperform if they are not managed effectively or if the ongoing investment fees are too high. So if you're investing to save for a specific goal, like a mortgage deposit or retirement, regularly drip-feeding money into a well-established tracker fund and getting on with your daily life may be all that's necessary. Investors who follow this approach don't need to check their portfolio every day, do any trading, or be constantly on the lookout for the next 'big thing'. In fact, since 1928, the S&P 500 - the index which tracks the largest US companies - has delivered a compound annual growth rate of about 10 per cent, or 6.9 per cent when adjusted for inflation, including reinvested dividends. This is despite numerous economic slowdowns, recessions and other global macroeconomic events which caused significant short-term volatility. The longer you invest, the more time your money has to earn interest from compounding. So, for example: Boring investing may not make big headlines, but it can build your wealth in the future. The key is to stay disciplined, drown out the noise, keep investing consistently - and let time and compounding do the work. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
25-04-2025
- Business
- The Independent
State pension: How to check yours, how to buy missing years and everything you need to know
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. As the population of the UK continues to live longer, more and more people are now claiming a pension. The most common remains the state pension, designed to give people a regular retirement income from the government. Those who qualify for this payment will get it regardless of whether they have other incomes or pensions, as it is based on contributions made whilst earning an income. It will be paid at different rates based on these contributions, up to a maximum of £230.25 per week, or £11,973 a year. This increases every year in line with the triple lock. After it is first claimed, it is usually paid every four weeks, instead of the same date every month. Here is everything you need to know about the state pension, how you can boost yours and how you can maximise your income in retirement. How does the state pension increase? The state pension rises every year to keep up with rising costs and other financial pressures. The triple-lock guarantee, first implemented in 2011, means the figure increases year-on-year by the highest of three measures. These are: Inflation, taken from the previous September's Consumer Price Index (CPI) figure The average wage increase in the UK Or 2.5 per cent, if both inflation and earnings are lower than this percentage In 2025, the state pension increased by 8.5 per cent, matching wage growth in 2024. Back in 2023, it rose by a massive 10.1 per cent as the cost of living crisis and after-effects of the Covid pandemic continued to be felt. The triple lock was introduced to ensure that the state pension would not be outstripped by rising prices, nor by the average spending power of those in work. The measure has been criticised for potentially lacking long-term sustainability, costing the government more each year. In 2023/24, pension payments cost the government an estimated £124.3bn. It also may be changed in the future. How you can check your state pension For those below state pension age, you can visit to check your state pension forecast. This will tell you how much you could receive when you retire, alongside when you can get it, if you can increase it and how you can increase it. This forecast can also be accessed via the HMRC app. Both of these online methods – which are the fastest – will require login information to be created when first used. Those not within 30 days of reaching state pension age also have the option of sending a BR19 application form by post, or calling the Future Pension Centre who will post the forecast to you. Those already receiving the state pension are advised to contact the Pension Service about their payments. And if you live abroad, you need to contact the International Pension Centre. Can you boost your state pension? The amount you receive in your state pension depends on how many years of National Insurance (NI) contributions you have made. These are called 'qualifying years' and you need at least ten to receive any state pension at all. To receive the full state pension, you need 35 qualifying years. This means anyone with gaps in their NI record might be able to pay voluntary contributions to plug these gaps and boost their entitlement. The gaps may have arisen because they were employed but had low earnings, unemployed and not claiming benefits, self-employed and not paying in contributions, or other reasons. These gaps can typically be filled in for the past six years, with the deadline being 5 April every year. Lisa Picardo, chief business officer UK at PensionBee said: 'Buying back missing National Insurance years can be an effective way to boost your State Pension, particularly if you are approaching retirement and discover you do not have the full 35 qualifying years of contributions or credits needed to receive the maximum State Pension amount. 'Depending on how many years you are missing or short, the upfront cost can be relatively small compared to the long-term financial benefit of a higher State Pension paid out for the rest of your life, making it worthwhile for many people to top up these gaps.' Do I need a workplace pension and a state pension? Most experts advise that workers invest in pension pots beyond what they will receive from the state pension alone in retirement. This is because the roughly £12,000 a year it can grant at most is unlikely to be able to fund a viable standard of living in retirement. The state pension can also only be accessed at retirement age – currently 66 and due to rise to 67 for everyone by 2028. However, private pensions can typically be accessed from age 55 (rising to 57 from 2028) giving more flexibility for those who might want to retire earlier. This means building up a personal or workplace pension is 'crucial' says Ms Picardo, 'to support the achievement of a more comfortable lifestyle that most people need in later life.' She adds: 'Even small, regular contributions paid into a personal or workplace pension can grow into substantial retirement wealth over time, especially as retirement savings are boosted with the help of tax relief, and they grow over the long-term benefitting from compounding investment returns. 'If you are employed, you may also benefit from employer contributions, which are typically at least three per cent of your wages. Increasing your contributions or asking your employer to match a higher amount can make a real difference to the size of your final pension pot.' The Pensions and Lifetime Savings Association (PLSA) has said that a single retiree needs around £14,400 a year to cover the basics in retirement, rising to £31,300 for a 'moderate' lifestyle. But research by PensionBee suggests that most people are retiring with far less than this. The average pot size for someone over the age of 50 is expected to be under £88,000, the provider's most recent Pension Landscape shows, rising to £124,000 for those currently aged 40 to 39. Many people also stop working before the state pension age, often to to ill health or caring responsibilities - what experts call a 'pre-state pension gap' where a significant financial shortfall is faced. 'To close this gap, people need to save into a personal pension, increase contributions where possible, and consider combining old pots to keep track of and manage their savings,' says Ms Picardo. 'If you are self-employed or not eligible for a workplace pension scheme, a personal pension like a SIPP can help you independently build up your retirement savings in a tax-efficient way and take control of your retirement outcome.' When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
28-03-2025
- Business
- The Independent
Why porting a mortgage might be right for you when moving to a new home
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Nevermind the sofa and the fridge - have you thought about taking your mortgage rate with you when you move home? If you were lucky enough to lock in a cheap deal before mortgage rates went through the roof, and don't want to lose it when moving, your lender may allow you to transfer it to a new property. This is known as 'porting.' It means you get to stay on your lower rate for longer, rather than having to pay today's prices - as while interest rates are expected to come down across 2025, they are still significantly higher than three or four years ago. However, porting is not quite as straightforward as it sounds and there are both pros and cons to consider. Here is what you need to know about porting your mortgage when moving home. Why might you port a mortgage? There are two main benefits to porting your mortgage. First, it lets you hold onto a cheaper mortgage rate (on the portion you are transferring) for as long as possible. When porting, you are moving the value of your existing mortgage, and its agreed rate, over to a new property. This can be useful if you still have time left on a low fixed rate, for example of one to two per cent from pre-2022 - or even simply if you have a mortgage which is locked below the rates now available. Although rates are slowly coming down, they are still high relative to previous years. You will still have to pass a new mortgage application with your current lender and might also need a second product if your new property is more expensive and you're borrowing more. But even if this is the case, it could still be more affordable than taking out a new mortgage for the full amount. For example, the average five-year fixed rate in March 2025 is 5.18 per cent, according to consumer site Which?, compared to just 2.74 per cent in March 2022. Therefore, you could keep a lower rate on the portion you're moving over, instead of paying a new higher rate on all of it. The overall difference this makes to you will depend on how long is left on your existing term. Paul Spencer-Nixon, principal partner at Fingerprint Financial Planning, says: 'There are still plenty of people on good mortgage deals from the low rate environment post-Covid. Porting can enable them to hold onto a good deal rather than face an interest rate that could quite easily now be double. Doing this keeps the nice low rate, and any additional borrowing would be at a rate available today. 'However, it's also important to consider what the monthly payments will be once the cheaper rate ends so there aren't any nasty surprises or problems later on.' Second benefit: avoiding fees Additionally, by sticking with your existing deal when you move, you also save on any Early Repayment Charges (ERCs) that could otherwise be due. Avoiding ERCs can also be a significant saving, as they typically range from one to five per cent of what you still owe. On the average UK mortgage balance of £132,000, this equates to between £1,320 and £6,600. Spencer-Nixon said: 'Depending on the balance of your mortgage, ERCs can be expensive. Even if interest rates were equal, it comes down to the maths of the current rate you are on versus any exit fees you would have to pay if you didn't port. Sometimes it's better to have a slightly higher interest rate rather than pay thousands of pounds in penalties. Other times it's not.' It's important to get a full picture of what you would be paying in both scenarios: if you opt for porting, and if you simply get a new mortgage for your new home. What are the cons of considering porting? Those are the two principle benefits - but there's still more to consider. Even if your lender allows porting (and not all do), this doesn't mean you have an automatic right to move your mortgage. You will have to go through affordability checks again, which you might not pass even though you did the first time. Any recent drops in income, credit blips, or even having had more children can go against you. Whether you are accepted will also depend on the value of the property you're buying and how much your lender is willing to cover: the loan-to-value. Another drawback could hit you later down the line, if you are having to take out a second loan to cover the shortfall on a more expensive home which may not end at the same time as your existing mortgage. Spencer-Nixon said: 'You need to factor in potentially having two parts to your mortgage that will end at different times. This can be complicated to tidy up in the future and could incur extra costs such as a temporary higher variable rate or additional arrangement fee.' Porting also means likely being locked in with your existing lender for the second product, which can potentially mean missing out on better deals elsewhere. Again, it's important to have all the details and work out your costs accordingly before reaching a final decision. How to port your mortgage Check the terms and conditions of your original mortgage offer to see if it's portable Review your current financial circumstances and whether you are likely to still be eligible for the deal Check rates for any additional borrowing with your lender and calculate if you can afford it. Take into account how much your monthly payments could go up once your cheaper rate ends Consider asking a mortgage adviser to help you work out if it's cheaper to port or pay any exit fees and take out a new deal Prepare application documents, such as bank statements and payslips or two years of accounts if you're self-employed Submit your application and wait to see if you're approved. You will usually have between three to six months to accept a mortgage offer, depending on the lender. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
