Early-retirement wannabe

gadgetmind

NedS said:

tigerspill said:

So is there a definition of "Self Employed"?
My wife and I have had rental properties.  She is still employed, but can she claim to be self employed ig she has these propertied after the leaves employment?

Yes, you have to be carrying out a recognised trade or profession. 

Thanks for the clarification. Seems mad that you can be running your own rental business and not be self employed, but that's HMRC for you. My wife is a "Horticultural Photographer", which they seem to recognise well enough!

NedS

gadgetmind said:

NedS said:

tigerspill said:

So is there a definition of "Self Employed"?
My wife and I have had rental properties.  She is still employed, but can she claim to be self employed ig she has these propertied after the leaves employment?

Yes, you have to be carrying out a recognised trade or profession. 

Thanks for the clarification. Seems mad that you can be running your own rental business and not be self employed, but that's HMRC for you. My wife is a "Horticultural Photographer", which they seem to recognise well enough!

HMRC do not see it as running a rental business - they see that you have an asset (residential property) that earns you a return on your investment (after costs) much like any other asset class you could have invested in (bonds, shares, commercial property, commodities, gold, premium bonds, bitcoin etc). So HMRC view you as an investor with investment income. If you'd chosen to invest in shares or gold, would that make you a self employed investment brokerage or precious metals dealership?

hugheskevi

An update following the previous post back on 10th April, as quite a lot has happened since then.

Quick recap - wife and I plan to retire shortly and go traveling for up to 3 years, then return and retire in Wales. Both currently aged 42 and we have no children and do not plan to have any.

Since April, the key developments are:

• It is becoming clear that we are going to be working at home for a very long time. This may be for the rest of our time working, and will certainly be the vast majority. Our employer does not plan to return employees to the office until at least 2021.
• My wife's father died, and she inherited a modest amount, around £60K, which moves our plans from being 'just about able to afford to retire immediately' to 'immediate retirement is viable option but could do with a few more reserves'
  

Our future income needs and resources break down nicely into the following stages of life (all figures after tax):

• Travel
  
• House purchase
  
• Post travel to age 50
• 50 to minimum pension age
• Minimum pension age to State Pension age
• State Pension age onwards

Travel

I have allocated £50K p/a for 3 years to this. I think that is about right, based on previous experience traveling and reviews of blogs from those who have traveled for long periods more recently. I am convinced £70K would be extremely comfortable.

House Purchase

I have budgeted £460,000 to buy a house in Wales. This can be quite flexible and could be moved downwards with minimal consequence. A budget of £500,000 would be the most I would want at the current time (after that properties just come with too much land). Our current house is worth around £500,000 so hopefully will wholly or mainly finance the purchase. There is house price risk in the period whilst we are away, but I prefer to take that risk rather than rent out properties and be many miles away.

Post travel to age 50

I have budgeted an amount equal to what our combined pensions will provide at age 50, currently £33K p/a. This will come from ISAs (already in place and funded to provide full amount).

50 to minimum pension age

This will be funded from Defined Benefit pensions with a protected minimum pension age. I assume minimum pension age will be 58.

Minimum pension age to State Pension age

The Defined Benefit pensions will continue, and be supplemented by DC pensions which are already in place. The DC pension will provide an income equivalent to what a full State Pension would provide. This would give an annual post tax income of £48,000 based on today's rates and accrued pension.

State Pension age onwards

State Pension will replace the income being provided by DC pensions, and continue at a combined £48,000 after tax.

Future strategy

All the allocated funding for the periods above will be in place once a property my wife inherited is sold.

COVID19 is now the barrier to retirement, given our first plan for retirement is to spend at least a year traveling from Prudhoe Bay to Tierra del Fuego (North America to South America overland trip). Travel in Alaska will be much easier between June to October, although we could do other things if we left outside that window. I am expecting that it will not be sensible (and maybe not even possible) to travel there before the second half of 2021.

I am now planning to base plans around the allocated figures above, but also build up a reserve. This will loosely be planned to be £100K, which would enable travel funds of £70K p/a for 3 years and a house purchase of £500K which is in the very comfortable range of forecast needs.

I wouldn't expect to use all of that, so in due course I'd expect some of it to be available for the period between returning from travel and minimum pension age, although the £33K income allocated for the post travel to minimum pension age period should be fine anyhow (and should have increased to about £35K in another year, giving even more comfort). This is the future period which might come under most financial stress.

The £48K post tax annual income after Minimum Pension age should be more than plenty, so I am not concerned about that period of life.

So plans now are to retire in second half of 2021. I don't want to be too precise given COVID19 uncertainty and plan to keep everything flexible and as many options open as possible.

barnstar2077

How the other half lives! :  )

westv

Looks about average to me. 

Robwales

gadgetmind said:

NedS said:

tigerspill said:

So is there a definition of "Self Employed"?
My wife and I have had rental properties.  She is still employed, but can she claim to be self employed ig she has these propertied after the leaves employment?

Yes, you have to be carrying out a recognised trade or profession. 

Thanks for the clarification. Seems mad that you can be running your own rental business and not be self employed, but that's HMRC for you. My wife is a "Horticultural Photographer", which they seem to recognise well enough!

Can someone explain this to me - my wife is a making jewellry - upto a hundred pounds sold per mth max.  Whats the proposition with regard NI you are describing for self employed (sorry im not sure about NI class etc)?  We had to make up her incomplete years prior (as we volunteered not to have child tax credits but then somehow in doing so didnt register our youungest so missed out on several yrs of NI credits from the Govt), but sounds like we are missing something else here?

mark55man

Yes that was a sting in the tail about child benefit.  But you don't need to make NI up until you know you need it as you near retirement.  But if its likely you need to do something every year then I think the following is right, but we are still playing wait and see with HMRC so might not be entirely word for word correct.  I think the principle is what gadgetmind was alluding to though

The premise is if you are self employed you play a different rate to make up contributions than if you are PAYE employed.  So its like £15 a week to make up PAYE where your salary was under the LEL (Lower Earnings Limit = about £120 a week) which is different from the Primary Threshold (where you actually start paying 12% NI about £180 per week).  For self employed Class 2 its less to make up your contribution ie about £5 a week, and the scoop is when you submit your self assessment for SE you can volunteer to pay these if your SE employment earns less that the LEL (which I think is the same for PAYE and SE).  

tigerspill

hugheskevi said:
our first plan for retirement is to spend at least a year traveling from Prudhoe Bay to Tierra del Fuego (North America to South America overland trip). Travel in Alaska will be much easier between June to October, although we could do other things if we left outside that window. I am expecting that it will not be sensible (and maybe not even possible) to travel there before the second half of 2021.

Sounds like an amazing trip.  Have you anymore detailed plans or an itinerary that you could share?
My wife has also come into an inheritance that has the potential to change our plans considerable.  Immediate retirement and more extensive travel (once this CV19 mess reduces).

coyrls

tigerspill said:

....... (once this CV19 mess reduces).

Don't hold your breath

mark55man

coyrls said:

tigerspill said:

....... (once this CV19 mess reduces).

Don't hold your breath

That might actually work, but there are drawbacks to be overcome