Living off my savings and sharedealing

bobbyj_2

Hi, I've recently been made redundant and so I'm now living off savings and investments and share dealing. Given I have no income from work I take it I can earn in interest around £6000 before I pay any tax on savings? I have 6 figures in my share ISA which i use to trade shares with and also £30000 in premium bonds (obviously winnings not taxed). I'm in my early 30s and have dabbled in shares for 10 years and have been quite successful to the point where I doubt I will bother working again (although if the right business came along then I would be interested). In all I've probably around £500,000 which I think is more than enough given I've made money in my ISA virtually from the start.

ps I've seen the question regards share trading being classed as an income here several times and from what many (and my own) accountants have said this is not the case and HMRC are'nt particularly keen to class individuals as traders so please don't start commenting about I'll be classed as a trader now that I'm no longer working.

I'd also like comments on how people would distribute £500,000 to give a half decent income. I have quite a 'gambling streak' within so I'm not happy keeping a huge amount in my ISA although I've been toying with the idea of sticking £200,000 in BP. VOD and RDSB for yield. I say this because in the past I've had several scrapes playing the 'average down' game and ended up with £250k in Dragon oil which gave me many a sleepless night 12/15 months back.

Also is there anything I can put in my ISA which will give me a monthly income?

thanks in advance for any comments.

Basil_Hume

I'm afraid that I can't offer help with your questions, but would add that much will depend on what level of lifestyle and income you want to have.

My wife and I are in a similar situation at your age, albeit with inherited money. It means that we've bought our house outright and that my reasonably-salaried job provides enough income to afford for my wife to stay at home, have children and for us to have a good standard of life. Were we to exist solely on the capital though...well, that would change things considerably and we'd clearly have to compromise on day-to-day living. For that reason, in the foreseeable future I will continue to work and build-up a work pension and additional savings via the ISA wrapper.

Do you already have a property or any commitments in terms of outgoings etc? My personal priority would be to continue to build-up your portfolio / assets, since I'm not convinced that the total alone will afford you enough income (perhaps £10-20k per annum interest at the moment?) in the medium-term future.

Lokolo

bobbyj wrote: »

Hi, I've recently been made redundant and so I'm now living off savings and investments and share dealing. Given I have no income from work I take it I can earn in interest around £6000 before I pay any tax on savings? I have 6 figures in my share ISA which i use to trade shares with and also £30000 in premium bonds (obviously winnings not taxed). I'm in my early 30s and have dabbled in shares for 10 years and have been quite successful to the point where I doubt I will bother working again (although if the right business came along then I would be interested). In all I've probably around £500,000 which I think is more than enough given I've made money in my ISA virtually from the start.

ps I've seen the question regards share trading being classed as an income here several times and from what many (and my own) accountants have said this is not the case and HMRC are'nt particularly keen to class individuals as traders so please don't start commenting about I'll be classed as a trader now that I'm no longer working.

I'd also like comments on how people would distribute £500,000 to give a half decent income. I have quite a 'gambling streak' within so I'm not happy keeping a huge amount in my ISA although I've been toying with the idea of sticking £200,000 in BP. VOD and RDSB for yield. I say this because in the past I've had several scrapes playing the 'average down' game and ended up with £250k in Dragon oil which gave me many a sleepless night 12/15 months back.

Also is there anything I can put in my ISA which will give me a monthly income?

thanks in advance for any comments.

Income Funds.

bobbyj_2

Thanks, paid mortgage off and if I move it will be to rented accomodation given it's my belief house prices need to drop around 40% to 50% before they can be considered reasonably priced.

I'm aiming to create around £1000 a month off savings then around £40/50k a year on average from shares - (I did 6 figs last year and even the worst years I've still managed around 20k). I've a feeling though this year could be tricky though so currently just scalping off FTSE100 stocks and don't expect a 6 fig profit year. Cheers 4 reply.

Masomnia

Don't forget inflation.

amcluesent

>I did 6 figs last year<

So, what's you play on BRICs?

jamesd

You may find the gambling introductory offers message section here of interest as a way to potentially generate a few thousand to a couple of tens of thousand a year.

Have a look at trustnet's list of funds and sort it by yield. Last time I looked there were 29 funds paying 7% or higher yield, mostly corporate bond funds. Invesco Perpetual Monthly Income Plus is a mixed bond and equity fund that pays out monthly.

Don't bother to try to get monthly income directly from the investments. Just put from six months to five years of cash in a savings account and have the income top that up whenever it is paid. The savings account then provides you month to month income stability while you watch the investments.

From the look of it you should be looking to put half or more into collective investments that you don't manage directly, with a medium or lower risk brief. This is your fallback fund in case you completely screw up sometime.

Are you doing anything to exploit the pension tax breaks?

What about EIS or VCT use for their tax breaks? Tax relief on the way in and tax free income might be of interest to you.

DireEmblem

+1 to the above mention of the gambling thread.

Dongle's diary is inspiring, given that in 3 years he has made ~50k out of it, and there are various £400PCM threads out there.

Also, you have asked for advice on a sum of say 500k, would it be worth investing in property where you are?

Where I am, 200k would get a reasonable 3 bedroom flat, so with 500k, I could afford 2. With that, I would be able to rent them out for at least £900PCM. Given that the flats wont be occupied 100% of the time(during transition of tenants etc), and maintenance, I would allow 10 months for income, and the remaining 2 months to cover repairs etc. That should turn in 18K PA, along with up to 1800 more to cover repairs etc.

With regards to sharedealing, good luck with that... I do monitor shares myself, however only at the moment to see what I could have made, if I were trading. I dont have anywhere near sufficient enough to put aside on trading.

Good luck with your ventures!

Rollinghome

bobbyj wrote: »

I doubt I will bother working again... In all I've probably around £500,000 which I think is more than enough given I've made money in my ISA virtually from the start.

Are you sure you aren't seriously over-estimating the likely returns on equities? Last year was truely exceptional and anyone who invested from March on could hardly fail to make money. It was caused by unique circumstances and the years to come are likely to be very different.

The long-term historic real return on UK equities has been 5.1% before costs. The worldwide average has been 5.2%. The real return on UK bonds has been 1.4%. UT high yield corporate bond funds currently offering distributions of 7% are likely to do so only at the cost of your capital. Typically such funds have lost around 20% of capital value over the last 5 years so you're likely to get a lower real return than from index-linked national savings.

If the plan is to retire in your thirties on just £500K, an investment in equities could be expected, but not guaranteed, to give you an income of around only £25,000 pa. Hardly enough for a life of luxury and barely enough to bring up a family should you decide to have one. Retiring in your thirties with enough for a yacht and six months a year in the Caribbean having your brow mopped could be fun but having a lot of time on your hands without an income to enjoy it could be quite the reverse.

If you do decide to go that route remember that in 10 years time you'll probably be unemployable if your investments go wrong. Getting a little more in the bank from employment or possibly taking the opportunity to start your own business might be a better ploy.

ed123_2

....I would gamble it all on shares....you will probably make 8 figures this year......

bobbyj_2

thanks for replies!
I'm not interested in retiring btw, I'm more interested in keeping the share thing going and just moving the rest around for a bit of income. I was just fishing for ideas etc and interesting to know what peeps think is a 'comfortable' income. I have a friend in his 50s who happily lives on about £500 a month, lives in a council house, has around 300k in shares and is happy as a pig in sh.. with his £300 car. I'm certainly not interested in scrimping but if I can increase my wealth by about 50k a year then that will do me.

ps yes last year was easy on the market but like i said i've made good profits consecutively for about 10 years hence built up a nice shares ISA so I have every confidence I can make money on the shares side of things.