Early-retirement wannabe

Terron

NedS said:

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?

Since this thread has be reawakened I would like to correct this.

HMRC do see it as running a rental business, by most of the definitions of business they use. There are at least five. Most impotantly they see as a business for NI purposes, per NIM74250 - Class 2 National Insurance contributions: special cases: property and investment businesses.

They do have a definition of self-employed which is basically that you have an income that is not from employment or pension. But the relevant definition for NI is whether you are in "gainfully (self-)employment". You can't qualify to pay Class 2 contributions by just "dabbling". The definition is by example and is rather vague. It allows for the case where your income varies so that in some years it is very little if in others it has been more.

My property business in my own name has been my main source of income for several years, but does not count as a "trade, profession or vocation", so I am allowed to pay class 2 NICs but am not required to. I have paid one year's worth this year to maximize my state pension.

Prior to 2015 NedS would have been right. There was a special definition of business used for property for NI purposes. If you counted as a business then you were required to pay NICs, but basic property letting did not count. However in 2014 HMRC reinterpreted the definition and started to chase more landlords for NICs. The government changed the law in 2015 to use the "trade, profession or vocation" test instead of the special business test, which basically put things back as they were.

Note that according to NIM74250 investment is also a businesss, and it is is possible to qualify as self-employed through investing. My investing is just dabbling though.

VoucherMan

I don't think I've posted on this one before, so as my time hopefully approaches...

Marine_life said:

Who is aiming for early retirement

If all goes according to my current plan, I'll be free of work by April next year, a month before I'm 54.

Marine_life said:

When did you begin planning and what drove the decision?

I probably only started giving it serious thought early last year. I'm not sure what drove me to do it, other than stumbling across 'The Number' topic. It was the initial lockdown, combined with 5 months furloughed that made me realise my needs (and wants) are much lower than many. I enjoy quite a simple life. Travelling (holidays) doesn't appeal to me. I don't want the latest gadget. I just need enough to replace (or repair) stuff when it breaks.

Marine_life said:

What is the strategy for getting there?

Put as much as I can into the pension fund, and build up a decent pot of savings to keep me going until I decide to draw the pension

Marine_life said:

How much of a relative decline in income are you prepared to take?

Over 50%. With the mortgage paid off, I'm putting as much into the pension (via salary sacrifice) as the taxman will allow. Whatever I have left is going into a savings account (okay, premium bonds. I may as well have a little fun on the way) Current spending is probably about a third of my salary, and retirement plans won't affect the figure much.

Marine_life said:

What are your main concerns?

Still not having enough time to do everything I want to do.

I decided a while ago that I'm not the typical wannabe, at least among those who post here, but I've been regularly checking my figures since the first lockdown, and I'm feeling quite comfortable with the way it's progressing. I think I originally hoped to retire at 60, before deciding that 55 way quite feasible.Recent changes at work have pushed me to think about leaving earlier, and next April ticks a number of boxes for me. I've been busy buying/replacing items, to avoid some bigger expenditure once the income stops. Unless something happens to put a big spanner in my plans, I'm looking forward to returning to work after Christmas to tell them I'm leaving.

JoeEngland

Latest update from me who gave up work in July 2019 for health reasons. This year we finally moved house and I've been doing decorating and DIY which is a slow process due to my physical health issues restricting how much I should do each day - I'm 54 but feel more like 64-74! The house conveyancing process was excruciating and took 5 months, and it was made all the worse by me being desperate to get away from where we used to live which I disliked for various reasons. Now we're living near the coast, which is a bonus since going abroad is so difficult at the moment.

DW finished work a few days ago and may look for PT work next year depending on how she feels. During the two years since I gave up work we've drawn down very little from savings (about 12% of the financial plan budget for that period) due to not spending much and her salary. The next 12 months will be interesting to see how we do against budget. Low interest rates are a pain for our cash savings, but the ISA and pension pots have been doing surprising well given that parts of the economy have been shut down for several periods since March 2020.

For me work is an increasingly distant memory and I don't miss it!

GazHol

I wasn’t aiming for early retirement, but I’ve now been aimed due to changes in our pension scheme that come into effect 1st Oct. The changes mean that I will retire at end Nov 2022 at 58.5, rather than my preferred 60. If I stayed on, I’d have to reach 62 to get the same yearly pension as at Nov 2022 (indexed at RPI up to 3% and 5%).

I’ve been preparing for this for the last 10 years or so, these Forums have helped immensely since I joined in 2014. I also prepared for this particular change by sitting on the Pension Consultation Forum, you really get to see the inner workings of a corporate pension scheme (as well as negotiations on behalf of several thousand people).

My strategy has been to use voluntary contributions, as well as moving a SIPP into the DC part of the scheme (SIPP was set up as an insurance as I was under threat of redundancy four years ago. Moved into the DC scheme will allow me to take it tax free as part of the TFLS in 2022).
I’m about to reduce my hours by 10% and will go down to four days per week in Summer 2022, I will maximise my AVC whilst keeping the DC pot =<25% of the total.

My DB will cover 75% of our spend in a normal year, so 125% in a lockdown year! DW gets her DB at 60 unreduced in 3 years, so we shouldn’t need to tap into our ISAs anytime soon. We’ve made sure our ISAs are evenly split, and that we each have less than 3 years NI left to get.

Main concern is inflation, I lived though the 70’s and vividly remember the three day week. We paid our mortgage off many years ago - an 8% interest rate was too frightening…

westv

Now the Government has withdrawn the work from home guidance our company has said we can either do 3, 4 or 5 days in the office and the rest wfh or, in some cases, move to a full time wfh contract (with a reduction in benefits).

I'm not sure what to choose.
Before Covid I went down to London on Monday, stayed in a rented room and then came back home Friday evening. Doing it for 3 days would mean less time away but it would still be a large amount of money to pay out - something I haven't done for almost 18 months. Then again being in the office means interaction with my colleagues.
This would not be something I would want to do past 60 - in 18 months time. In fact, I was considering going at 59.

On the other hand a wfh contract would save me paying out for fares and room rent but I would have much less interaction with other team members. On the other hand it would be more sustainable post 60 and much easier financially to reduce my days worked if wanted.

Linton

westv said:

Now the Government has withdrawn the work from home guidance our company has said we can either do 3, 4 or 5 days in the office and the rest wfh or, in some cases, move to a full time wfh contract (with a reduction in benefits).

I'm not sure what to choose.
Before Covid I went down to London on Monday, stayed in a rented room and then came back home Friday evening. Doing it for 3 days would mean less time away but it would still be a large amount of money to pay out - something I haven't done for almost 18 months. Then again being in the office means interaction with my colleagues.
This would not be something I would want to do past 60 - in 18 months time. In fact, I was considering going at 59.

On the other hand a wfh contract would save me paying out for fares and room rent but I would have much less interaction with other team members. On the other hand it would be more sustainable post 60 and much easier financially to reduce my days worked if wanted.

If you are considering leaving in 6-18 months time does the interaction with other team members matter?  Will some of them be switching to wfh anyway?

Presumably all important meetings and many unimportant ones would have to be run online since at least one team member could be be absent on any day.

You could use the wfh as the first stage of preparing for retirement.

Is the reduction in benefits after tax less than the cost of fares/rent?

Do  you really enjoy 2 long commutes and 2-4 nights in a rented room every week?

For me wfh would be close to a no-brainer.

westv

Linton said:

westv said:

Now the Government has withdrawn the work from home guidance our company has said we can either do 3, 4 or 5 days in the office and the rest wfh or, in some cases, move to a full time wfh contract (with a reduction in benefits).

I'm not sure what to choose.
Before Covid I went down to London on Monday, stayed in a rented room and then came back home Friday evening. Doing it for 3 days would mean less time away but it would still be a large amount of money to pay out - something I haven't done for almost 18 months. Then again being in the office means interaction with my colleagues.
This would not be something I would want to do past 60 - in 18 months time. In fact, I was considering going at 59.

On the other hand a wfh contract would save me paying out for fares and room rent but I would have much less interaction with other team members. On the other hand it would be more sustainable post 60 and much easier financially to reduce my days worked if wanted.

If you are considering leaving in 6-18 months time does the interaction with other team members matter?  Will some of them be switching to wfh anyway?

Presumably all important meetings and many unimportant ones would have to be run online since at least one team member could be be absent on any day.

You could use the wfh as the first stage of preparing for retirement.

Is the reduction in benefits after tax less than the cost of fares/rent?

Do  you really enjoy 2 long commutes and 2-4 nights in a rented room every week?

For me wfh would be close to a no-brainer.

Yes, I think i would use wfh as a stepping stone to retirement.
I don't know the reduction (I have asked and await a response) but I would be very surprised if it was more than fares/rent.
No, I have never really enjoyed those parts of it (long commute and rented room) - being doing it since October 2012 prior to Covid. On the other hand there is something about the hustle and bustle of the City.

mark55man

I agree with Linton. 

I do agree there is something about the hustle and bustle of the city, but you could get most of that as a tourist and not in an office.  with your old persons railcard and leaving off peak you could spend all day hustling and bustling and then have a lie in the following day

MallyGirl

It is interesting that a wfh contract reduces some benefits. I am lucky that I have been wfh for 17 years now and I actually get a monthly amount that used to be called a 'homeworkers allowance' that aimed to contribute towards bills etc from being at home but working. Mind you I also used to get a car allowance! These days both are lumped together on the payslip as a single 'cash allowance' with the origins lost in the mists of time (which is good as my grade doesn't qualify for a car and I like to claim the 40p a mile if I ever have to drive anywhere).
We are going completely flexible - as long as your manager is ok with it you can basically wfh all the time now.  A couple of my colleagues can't wait to get back in the office because their home setup isn't great for working but the vast majority will be at home 90/95/100% of the time

gtat

westv said:

Linton said:

westv said:

Now the Government has withdrawn the work from home guidance our company has said we can either do 3, 4 or 5 days in the office and the rest wfh or, in some cases, move to a full time wfh contract (with a reduction in benefits).

I'm not sure what to choose.
Before Covid I went down to London on Monday, stayed in a rented room and then came back home Friday evening. Doing it for 3 days would mean less time away but it would still be a large amount of money to pay out - something I haven't done for almost 18 months. Then again being in the office means interaction with my colleagues.
This would not be something I would want to do past 60 - in 18 months time. In fact, I was considering going at 59.

On the other hand a wfh contract would save me paying out for fares and room rent but I would have much less interaction with other team members. On the other hand it would be more sustainable post 60 and much easier financially to reduce my days worked if wanted.

If you are considering leaving in 6-18 months time does the interaction with other team members matter?  Will some of them be switching to wfh anyway?

Presumably all important meetings and many unimportant ones would have to be run online since at least one team member could be be absent on any day.

You could use the wfh as the first stage of preparing for retirement.

Is the reduction in benefits after tax less than the cost of fares/rent?

Do  you really enjoy 2 long commutes and 2-4 nights in a rented room every week?

For me wfh would be close to a no-brainer.

Yes, I think i would use wfh as a stepping stone to retirement.
I don't know the reduction (I have asked and await a response) but I would be very surprised if it was more than fares/rent.
No, I have never really enjoyed those parts of it (long commute and rented room) - being doing it since October 2012 prior to Covid. On the other hand there is something about the hustle and bustle of the City.

I would tell tmyour employer they are saving money from staff WFH as they can rent a smaller office space, so in fact you should be getting additional benefits!