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Earning passive income in the UK is becoming increasingly popular. People want to escape the 9-5 and earn money whilst sipping cocktails on the beach or basically doing anything else rather than earning money.
There are lots of ways that you can do this, but before I jump in with my suggestions, let’s just breakdown exactly what passive income is.
What is passive income?
It is money that you make without you needing to take action to get it. Most of us earn money from our jobs. It is a direct exchange of your time for money.
Passive income is, in theory, the opposite of this. It is money made from previous efforts or current assets.
In order to create passive income streams, you normally need either money or time. This might seem counterintuitive to its definition but once you have set up the passive income source, it shouldn’t require significant further effort.
What are the benefits of creating passive income?
The simple answer is freedom. When we make our money directly from selling our time (let’s be honest that is what work is), then we will be forever tied to our jobs to pay the bills.
It can also mean that we are trapped in schedules and locations that aren’t ideal. When you create passive income you can free yourself from this too. If you are making money without your continued input, then there is no reason why this money can’t roll in from anywhere in the world at any time of day.
Your version of what freedom looks like will be different from mine. My freedom is setting my own work hours, taking my kids to school every day, and travel whenever I fancy. Yours might be living in a little hut in the mountains with no internet. Horses for courses.
The differences between different passive income streams
No two passive income sources are equal. They each come with different time requirements, initial cash injections, and potential returns.
You will need to weigh them up individually to determine which will work best for you in your situation and your desired lifestyle. Plus, there is no need to limit yourself to just one.
Whilst I would say it is worthwhile to focus your efforts on building one or two at a time, there is no reasons why you shouldn’t work on building multiple layers of passive income. They say that the average millionaire has 7!
25 ideas for creating passive income in the UK
Here are some of my favourites, but this is by no means an exhaustive list. Use your own creativity to create unique passive income streams that build on your resources and talents.
Investing in stocks and shares
This is by far the simplest ways to build passive income. Naturally, if you want to live off it, then you are likely to need at least £500,000 already invested.
However, you can start to make money from this even if you start small, plus you will get the benefits of compounding interest. This means that you will make money on the money that you make, and your wealth will increase exponentially.
Naturally, there are some risks when it comes to investing in stocks and shares. You will never be able to eliminate this risk, but you can reduce it by investing in index funds and ETFs instead.
Check out this video for more information on investing in the stock market.
A personal favourite of mine, mostly because it has the potential to create many passive income streams. Furthermore, you can start a blog with less than £50 (check out this blog post to create an entire blog in less than 24 hours.)
Ultimately the risks on this one are low. If you decide to give up your website, then you will have paid out the initial £50 and several hours of your time but the potential gains are huge.
You can make money from blogging in several ways: affiliate marketing, advertising, and sponsored posts. But you can also leverage your website as a platform to sell products and promote other income generating resources.
I think this is one of the most talked about forms of passive income in the UK. For many of us, this is the dream. To own a portfolio of rental properties and live life from the rental income.
It is a good strategy if you can make the numbers work. You will need have the funds available to as a minimum get a buy-to-let mortgage. These start at 25%.
There are other costs to consider such as management fees, purchasing costs, maintenance, and tax. It is initial investment heavy and requires some degree of ongoing attention, but can prove lucrative if done correctly.
Another great way to sell your skills and knowledge, without sacrificing your time in a job, is to create and sell digital courses.
You can create these around any topic, so for example, if you are a teacher, you could create a course around how to create mid-term plans that help other teachers with their organisation. Or you can deliver basic language learning courses.
This are just a couple of examples. Any skills that you have can be turned into a course that someone else can purchase to learn from you.
That are several platforms that you can host your courses on, such as Teachable and Udemy. The platform you choose should depend on how you intend to market it and how you want to present your content.
Amazon has made it easier than ever to write and make money from books. With Kindle Direct Publishing, you can write, edit, and upload your books to Amazon for free. From there you can sell them in digital or paperback form.
You could write books on any topic that interests you: fiction or non-fiction. You will then get paid directly from Amazon for any book you sell. If you want you can write multiple books, and just let the money roll in.
Of course, this comes with the potential for zero initial financial investment, but is likely to require a big time commitment in the beginning.
YouTube is the second largest search engine in the world, and continues to grow. People love watching video content more than ever, so there is huge potential to generate income here.
YouTube allows those with 1,000 subscribers and 4,000 watched hours in the last year to apply for their advertising program. This means that you can make money from people just watching your videos.
But there are other ways that you can make money too. You could promote your own products, collaborate on sponsored posts or use affiliate marketing. Even those who do not yet meet YouTube’s monetisation requirement can still earn money from their platforms. You can check out my channel here.
Affiliate marketing goes hand-in-hand with some of the other passive income ideas that I have mentioned, including blogging, YouTube and later Pinterest.
It works by you promoting a company and receiving payment when a customer signs up or makes a purchase. There are lots of companies that offer affiliate programs including Amazon. eBay, and Etsy.
Alternatively, you can sign up to affiliate networks, such as Awin, Impact, Tradedoubler and Share-A-Sale and sign up to multiple programs at once.
You will need some sort of audience to promote these to, such as social media, website, YouTube, or podcast, but the rewards can be ongoing and significant.
Stock photography & videography
If you are good with a camera, then it might be possible for you to sell your images. There are websites such as Shutterstock that allow you to list your images.
They could then be purchased by people to use in marketing materials, on websites, or any other use really.
The return on this per photo or video is normally small. Therefore, it works out best if you are the sort of person that regularly takes photo or videos anyway.
There are examples, however, of individuals who have sold usage rights to their content for large figures, so be on the look out for these opportunities. Even newspapers and magazines will pay good money if you manage to capture something topical.
The scope here is huge. It could be digital art or planner or spreadsheets to help you budget. You could create workbooks that help people build new skills or design trackers that help new mums stay organised.
As you are dealing with digital products, once created they will require practically no input from you to sell. You could choose to list them on Etsy or you could create your own website and sell them from there.
These are potentially free to make. There are some fees involved for selling, but likely small in comparison. Plus, a relatively low risk venture overall.
These are monthly subscriptions to a product or service. There are a huge variety of these around catering for all kinds of different needs.
A friend of mine is in the process of creating a self-care membership, which allows you get rituals and exercises delivered straight to your inbox. You get a free dance class once a month too.
You could create anything though, but you need to deliver a quality service that makes people stick around month after month.
You can create these on your own website, or host them externally on a platform such as Teachable. In order to provide value each month, you are likely to need to commit a significant amount of time to keep people paying.
Investing for dividends
I talked already about investing in stocks and shares and this model works mostly on the value of your investments increasing. Instead, you could work on investing for dividend income.
Dividends are payments that are made to shareholders. This is normally a share of the profits and it is made once or twice per year.
For more information, check out this video on the subject.
Rent out your loft
This doesn’t specifically have to be your loft, but it could be any storage space that you have available. People have stuff and they need somewhere to put it.
There are websites that will help you list your loft or storage space for help. Try StashBee to see how much you could earn by letting other people put their stuff in your loft.
Run an Airbnb
This one is similar to rental income but you are focusing on short term rentals (typically holiday rentals instead.)
Most people have dedicated properties that they use for this, but it doesn’t have to be expensive bricks and mortar accommodation. It could be a caravan or yurt on a quiet field, or even just somewhere to pitch a tent.
You could even consider renting out your main property if you are regularly away from home. There are some considerations such as maintaining the property and cleaning costs too.
Although this is similar to rental income, it looks at a slightly different take. Rather than focusing on the income made from rent payments, it looks at the capital gains made from the property. How much it increases in value over time.
For many, the home that they live in is an investment that they hope will increase in value. Although you can make money this way, it will be hard to access that money. Particularly at short notice.
It will also require a sizeable initial investment and a lot of maintenance and upkeep along the way, so it is important to factor these into your calculations.
This is the platform that Amazon uses for creating audiobooks. You can either turn your own books into audiobooks, or you can get paid for reading others’.
The system is easy to use and you can advertise yourself as available to read books. You can do this as a flat fee or you get paid for each book sold. This is a better route for those looking to build passive income.
You will need some audio recording equipment and a fair amount of time to research and record the material. But could work really well if you are used to public speaking or have a background in acting.
Print on demand
This is a great one for more creative types. You can design you own merchandise and then print on demand companies do all the work for you.
You will need a website, some design tools, and a way of marketing your products. When your customer places an order this will be sent straight to the print on demand company, who will print your design on the requested t-shirt, mug, notebook etc and ship it straight to the customer.
For each on that you sell you get to keep a percentage and the rest goes to the printing company. There are lots of these around but printify.com is the one that I have hard the most about.
There are people that are making thousands each month just by pinning images to Pinterest. You don’t even need a blog or website for this. You just need to understand affiliate marketing.
You can create your own images or pins for different products or services, and then you link these images to your affiliate links.
If you think about how people use Pinterest, they create boards with pictures of things that inspire them and then go back and click on them when they want to buy. You’ll need to pin regularly to get your images seen but it is a low risk and low initial investment idea.
Rent a driveway
This is the perfect passive income stream for those living in the UKs busiest streets. If you live in a big city where parking comes at a premium and have space on your driveway for someone else to park a car, then you can rent it out.
This also works out if you live near sports or music venues. You could rent your parking space out around the time of events and make some money.
There are lots of websites that will allow you to list your driveway for others to find. A great way to make money from a space that is otherwise unused.
Not a guaranteed passive income stream but could work out well for some. Premium bonds are an investment product offered by NS&I that operate a little differently from other stocks and bonds.
Rather than paying out a guaranteed interest rate or dividend, you get entered into a sort of lottery that pays out between £25 and £1million tax-free to lucky winners.
In reality though, their average prize rate works out at about 1% on the initial investment, and there’s no guarantee that you will make anything.
Like blogging and YouTube, podcasts can make money in a variety of ways. If you have a podast, then like you have an audience and this can be monetised.
Typical ways to make money from podcasts include sponsorship, promoting your own products and services, ad networks, and affiliate links.
Advertising and sponsorship is generally harder to achieve with a podcast with low listenership, but the other two should be achievable from day one.
Fast becoming my favourite social media platform, TikTok is adapting to its users and now comes with several ways that you can monetise your platform. Furthermore, the lifespan of the average TikTok is 6 months, so you can make money from older content.
Like with any media platform you can use it for sponsorships or affiliates. But TikTok also has its own Creator’s Fund. You get paid based on the amount of views that your content receives each day, so it is great for building up another passive income stream.
It is free to do and you don’t need any specific equipment, but you will need to spend some time creating content each week. If you want to see how I do it, then check me out here.
Rent a room
If you are lucky enough to have a spare room in your house you could create passive income by renting it out to lodger. This could either be on a short term arrangement or over a longer period.
Naturally there will be some costs involved in another person living in your house, but in general you are getting the maximum return on your space. This is a particular good way for those in high demand areas to have some help paying their mortgage and bills.
Furthermore, thanks to the Government’s Rent a Room scheme, you can earn £7500 per tax year tax-free from this.
Rent out your stuff
This one is perfect for people that like to buy and hoard stuff. You can rent out your stuff using a website called Fat Llama.
You list the items that you are happy to rent out and people will borrow them off you for a fee. This is ideally for people with tools and equipment that are rarely used. You can create passive income from them when you are not using them.
High interest savings accounts
Although the interest rates on savings accounts are pretty low at the moment. There is a still some passive income to be had, particularly if you are prepared to lock your money away for longer periods of time.
There are a number of banks and building societies that will offer you better rates of interest if you can put the money away for 1, 2, 5 or even 10 years. The benefit of this over say investing in stocks and shares is that you are guaranteed to get your money back.
However, you are going to need fairly significant amount of money to make a major return on this, and your money will be inaccessible for a fair amount of time.
Invest in bonds
If you fancy the idea of investing, but are looking for lower risk then investing in bonds could work out a great source of passive income for you.
Unlike stocks and shares you don’t own a piece of a company, instead you are lending them money and they pay you interest on that investment. They typically have a lower return than stocks and shares, but are also less volatile.
They are easy to purchase through investing platforms and are a great way to build up an increasing source of passive income.