Ask Me Anything (Part II)

ask-me-anything-part-2

Here’s Part II of Ask Me Anything! This one focuses on making & saving money, career, accounting and contracting!

If you missed the first part you can read it here.

Once again some great questions arrived into my inbox. If you’d like to add something or thank me or whatever please write a comment 🙂 I prefer comments to e-mails since other people can benefit too!

Making & Saving Money

What is the most cost-effective way to own a car – buying 2nd hand or leasing one?

May I say I don’t know as I don’t own a car (yet!). I’m deferring this decision further and further. I even moved next to the tube and signed up to Drive Now just to avoid it! But it’s coming… And buying 2nd hand vs leasing is a good question.

From doing a quick online research it looks like the answer, as usual, is: “it depends”.

  • How well it retains its value (the most important factor)
  • How long you plan to keep it for
  • The number of miles you plan to drive
  • Do you need a new car every 3 years?

To summarise, leasing is good when you don’t want to spend a lot of money upfront and want a hassle-free experience. Road tax, breakdown cover and sometimes service too are included. If you, like me, own a VAT-registered Ltd then leasing is tax-deductible 😉

But then you don’t really have anything to show for your money. Therefore if you really plan to keep it ‘forever’ buying a second-hand car may be a better option. My gut instinct tells me this is what I will do too, but let’s see.

Do you think matched betting is the best side hustle?

Matched betting is one of my favourite side hustles. As you can see from the graph below, it beats all the popular ones like answering online surveys, proofreading, etc. £500-600 per month is hard to beat. And you can do much better as an “advanced” matched bettor with loopholes like each way matching.

is matched betting worth it 2019
My matched betting profits, Oct 16 – Nov 18

But in my opinion, I think matched betting can only get you so far. I mean, making money is great but you’re not earning something more out of it. You’re not building something for your time.

For example, I recently met with an ex-colleague. When talking about our “new” lives, he mentioned his wife is very happy in a new small business she created.

She is selling Indian jewellery to people living in the UK and earns between £800-2000 per month. Now THAT’S a great side hustle. The more time you put into it, the better your business becomes. You build reputation and equity into your business. Not to mention that your future profits will be higher.

My favourite side hustle right now is blogging. I have not abandoned matched betting as cold-hard cash is always welcome 🙂 But the more time I put into blogging, the more I get back in terms of pleasure from talking to readers, educating myself when I research and structuring my thoughts when writing. Money rewards have slowly started to follow, no doubt!

So want to start a side hustle and don’t know where to begin? Ask yourself what is that you’re best at and you like doing. Then try to see if you can sell your value to someone if money is that you’re after. Popup business school have started a business out of helping people find their side hustle 😉

Since I’m broke, can I make money from no money?

You probably have a phone. Start a YouTube channel. Or a podcast. Ask to offer your services in exchange for money. There must be something you’re skilled on. Sell stuff you don’t need for a profit. Or arbitrage on Amazon what you find on eBay. Make some extra income and start matched betting. Then start investing your earnings to generate passive income.

I mean… Even when entrepreneurs have money, they prefer to use other people’s money (investors) to conduct their businesses. That’s part of capitalism.

If you had a house in an affluent area – the kind where you spend £100k on an extension and it adds £120k of value would it be something you’d look to do vs investing that cash.  I can see some pros with the extension: More comfortable + practical living which adds value to an appreciating asset.  Downsides – money that is locked into an illiquid asset and a possible slight increase in bills due to increase in house size.

More comfortable and practical living leads me to suspect it’s your own home. In which case, the money is locked into it until you sell, if ever. So you’re spending £100k to get back £120k, a 20% return on your investment if you see it from a pure math point of view.

Now more comfortable and practical living sounds great to me. I think that there are qualitative things to consider here that I cannot really measure. Like, how much you will enjoy your new home. Or how much is this extension needed. Will it make you much happier or not? 

If it’s worth spending £100k to make it much better then sure go for it. On the other hand, one could argue that fixing it up can always wait since the house is yours. I don’t expect labour costs to go up in the short-term. But at the same time, even if you fix your house right now, the opportunity cost is low. In other words, we’re at the late market cycle and investment returns should be modest going forward.

Career

What are some steps one can take in order to make their blog and Github profile work in their favour regarding job searching and salary negotiations?

How to make your blog work in your favour in terms of job search and salary negotiations.

  1. Treat your online place as a personal brand

    Include it in all possible conversations (including interviews, CV and salary negotiations). This is something that adds on top of your regular skillset.It shows you’re quite eager to learn and to also teach someone else.

  2. Work on things you want to be hired on.

    For example, you may like technology X but it’s not your thing. Allocate some time on researching it and write a post or prototype on how it works. You may not have official work experience yet but it can count as such since you worked on it.

  3. Post regular updates on LinkedIn

    It’s not unusual for people to scroll down the LinkedIn Wall as if it’s Facebook.

I really like your blog, amazing work! I am working full time for a company meanwhile I maintain a blog with tutorials on software. I want to publish some books through Amazon and also publish some courses on Udemy. Is there any way to be an employee and meanwhile have a company to land some contracts (and actually paving the way to a good network and contracting full time)? What is the cost of in terms of fees per month for doing so?

Being an employee and having a separate company is indeed possible. I know a few people who do it.

I can only speak for UK companies though and opening a limited company is straightforward. It costs £12 and you can also do it online. I believe you’ll need a registered UK address or alternatively you can use your accountant’s address for that.

The accountancy cost of running a small consultancy company is about £100 a month on average. Happy to introduce you to my IT accountant if you want. If you think that’s a lot of money, then you can work as a sole trader. You can simply invoice clients but you’ll still have to file a tax return every year. Worth researching that for the beginning.

I would combine the tax and accounting with the contracting company above as the subject is quite similar. But better ask an accountant!

Accountancy – Contracting

Accountancy - contracting

When is the right time to get an accountant and should they be the experts on tax advice?

Great question! I assume the right time to get one is when it’s too complex to do it yourself or you don’t have the appetite for doing so. But you may want to structure your investments right from the beginning (assuming you don’t just invest in a simple ISA). Property investment is a good example. What do you do? Do you purchase via a limited company or personally as it used to be the case before the mortgage tax law changes? What if you have existing properties?

The accountant should be able to provide tax advice in the form of “Considering your personal situation, our opinion is that you should do this…”.

What are examples of legitimate business expenses in the same case above?

This is a future post I have in my todos and a great addition to the upcoming “Foxy Monkey Contractor’s Corner” 😉

In short, one can claim lunch and travelling expenses as long as the contract is less than 24 months. i.e. Pret and oyster card/train tickets.

Accountancy expenses, items related to your trade (for example, I’m an IT consultant, I can expense a laptop and a phone for software testing), a one-off annual event up to £150 per head, office cost if any, internet (on company’s name), phone plan (on company’s name).

You can claim part of your monthly mortgage payments / rent. The amount depends on the hours you work from home. For example, you work 3 days a week from home you claim the 8h x 3d = 24h / 168h = 14.28% of your weekly mortgage cost. I will write a separate more thorough blog post on contractor expenses.

Have I forgotten anything? As always, ask your accountant!

How can I structure any additional companies as an investment vehicle so that I can preserve future entrepreneur relief of winding down my trading LTD and also not foul of being a close investment company. The comments in one of your blog posts highlight the confusion and conflicting advice regarding this. Are you planning on a follow-up post to this? Or do you have any advice on how best to structure this?

There’s a lot of confusion around company investments. Unfortunately, it seems that most people don’t do anything with their company cash which is a shame. I believe that’s why there are no clear and mature guidelines about it.

After talking to a number of accountants, the best way I personally found was to set up a second company for investments. This way you separate the trading company from the investment company and these two run as completely separate entities. As a result, you avoid the risk of your trading company not being able to claim Entrepreneurs Relief or to be classified as CIC.

Although the quickest way to invest is to invest directly from your trading company, this is also the riskiest one. Yes, you avoid the hassle of setting up a second one and lending money and some people do this. But if you invest a large amount then you may run into ER issues. I doubt it’s the right way to go which is why I kept it clean. I suggest you speak to a qualified accountant before you implement anything. Happy to introduce you to one when ready.

What are some of the tax-efficient options available to folks that are a sole director limited company, but want advice on what could be possible with cash held in the business?

Please see answer above for company structure. Regarding options about where to invest your business cash you probably want to read the appropriate section on the How to Invest your Company Profits guide. In short, stocks, bonds, funds, property, property partner, peer-to-peer lending are all valid options and there are more coming up.

I wrote my thoughts. Now it’s time I see yours in the comments :) Your email is not visible when you comment and you can put whatever name/email.

Disclaimer: None of the above should be considered investment or tax advice. I have not considered your personal situation and you should seek professional help. I’m just a random guy on the internet. As always, do your own research.

Share this article:

Share on facebook
Share on twitter
Share on pinterest
Share on whatsapp

Liked this article?

Every 2 weeks, I send a handwritten email with honest, valuable content.
If you want to receive it please subscribe below! No spam, ever.

You may also like...

9 thoughts on “Ask Me Anything (Part II)”

  1. Great reading – thank you Michael and everyone for all these questions. On buying vs leasing, I hope you don’ mind me sharing my thoughts. After doing my research and delaying this for some times now, I decided to go for leasing for the next 3 years (new addition to family, I need a hassle free experience) then I will probably buy second hand car.

  2. Hello Michael, I run a small Ltd company, I didn’t think I was allowed to claim for mortgage expenses? I only claim the “flat £4 per week fixed expense for using my home as an office (no receipts needed). I’d would be ecstatic if I was wrong!!

    https://www.companybug.com/home-office-expenses-limited-company/
    What about reclaiming the cost of rent, and mortgage interest?
    Directors (and employees) can’t claim back any proportion of rent, mortgage interest, or council tax from their companies – as these costs would have been paid personally anyway. This is stated in HMRC EIM32815.

    • Hey Rob, sorry I kept the business expenses for home very brief. The plan is to write a separate post as this requires more than a few sentences! Yes, you can claim the mortgage interest as well as rent but not capital. You can only claim the percentage of time you use for doing business. So say you work for 30 hours a week in a play room that you share between personal and business. The room is 1/4th of your home. Then you can claim (30/168) * (1/4) = 4.46% per week. So if you’re paying £1,000 rent/interest, that is
      £1,000*4.46% = £44.6 a week or £2,320 a year.

      See also business use of home from Freeagent. I believe that’s much better than the simplified £4 ‘Use of home’ per week, but you’ll have to justify it if investigated.

      I’m just going by what I’m told by my accountant and the internet. That’s not tax advice 🙂

  3. Another Great Read, Michael. I look forward to your blogs. Thanks for sharing.

    I have a query about investing from company. If you create another company for investment, you’ll transfer the money in it from from you trading company, which would bein the form of a loan. As I was informed, you can not close your trading company unless all the loans are paid off (which essentially will not happen for a long time with the interest/dividend income). That will also prevent you from closing the company and so from being able to avail entrepreneurial relief as well. Not sure, if I am missing something here.

    • Thanks, Kavita for your kind words. I was told there is an option to write-off the loans and claim ER in the trading company if that’s what you want. I will be facing this problem in ~5 years time that I hope I’ll achieve financial independence. However, I may keep my IT company open for having the opportunity to land some contracts if I want to. Will see.

  4. Hi Michael, Yes that’s what my query was about. Thanks for addressing. If there is an option to write off the loan and claim ER, that’s great. I am not yet sure about my future plans, but it’s good to know what your options are. Thanks again !!

Leave a Comment

Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

Liked this article?

Every 2 weeks, I send a handwritten email with honest, valuable content.
If you want to receive it please subscribe below! No spam, ever.

Recent Posts