Where to invest money to get monthly income in the UK | Moneyfarm (2024)

Some people invest their money simply hoping their capital will grow long-term. Others are more intent on investing with a view to their investment earning them a monthly income, and watching it grow. If you fall into the latter group and you want to know where to invest money to get monthly income in the UK, this Moneyfarm blog is for you.

There are dozens of investments that pay monthly income in the UK, so many that it can be somewhat confusing. Some are riskier than others, so establishing your risk profile is the best place to start your deliberations.

If you are looking for safe savings or investments, the best options are a bank account, an ordinary savings account, or government bonds. The first two are not really investments. They are just savings.

Using passive income to provide dual income

If you have a dual-income in the sense that you live with a partner and pool your incomes to cover the cost of living, fund R&R activities and save whatever is left over, you need to look at both your risk profiles. It’s essential to agree that if you’re going to invest your unallocated cash, what asset classes and investment vehicles you will choose.

If you both want a dual-income in the sense that you are looking for supplementary income streams in addition to your earnings from work, that narrows the options down. There is, however, still plenty of choices – possibly a bewildering choice.

The important thing is that if you both have full-time jobs, you need your dual income to be passive income. You probably don’t have the time required to manage your investments, so passive is best actively.

So, let’s look at a few options to see if we can help you decide on the best ones to invest in for monthly income in the UK – options with which both of you will feel comfortable.

Stock market shares that pay monthly dividends

When many people think of investing, the first thing that pops into their minds is stocks and shares traded on indices like the FTSE 100. Many pay dividends annually, bi-annually, or quarterly. But you can get monthly paying dividend stocks in the UK too.

The best UK monthly dividend stocks

There are a number of stocks that pay dividends monthly for UK investors, and you can check them out on dividenddata.co.uk. Many are included in ETF funds. These are perfect passive income investments. They have good diversity – one of the critical factors in reducing risk, and you have professional fund managers to look after the day-to-day management.

Month income Investments in the UK from real estate

If you want to know where to invest money to get monthly income, real estate is another popular investment option. However, you must choose your vehicle carefully. Getting trouble-free rental income can be a nightmare if you go it alone.

Student, residential and holiday property income

There are several ways to invest in student property – HMOs (Homes of Multiple Occupancy) or PBSAs (Purpose-Built Student Accommodation). While both types of investments can provide monthly income, they both have their pitfalls.

HMOs are notorious for having high maintenance and repair costs, while it is not possible to get mortgages for PBSAs.

Holiday home properties are also notorious for incurring high maintenance costs and repair bills.

Residential homes are often seen as a more stable income platform, but even these can cause problems if you are unlucky enough to encounter rogue tenants. There are many horror stories of rents being withheld and your property being returned to you in appalling condition.

Crowdfunding property investment platforms

Like any conventional form of property investing, joining an online crowdfunding investment platform doesn’t guarantee success. There is always an element of risk, and you could lose your money.

Another thing to be aware of is that most platforms charge a joining fee of around 5%, and if you’re involved in a buy-to-let opportunity, you need to be mindful that you will have to contribute to management fees. Finally, you could have to pay capital gains tax on exit.

Peer-to-peer investment platforms

Peer to Peer lending is a type of crowdfunding whereby investors use peer-to-peer investment platforms to lend money to borrowers for developments. While it is a passive form of investment, like any type of investing, your capital is at risk, and the FSCS does not cover any loss.

The mutual fund real estate and real estate investment trusts markets

Mutual real estate funds like the Schroders Capital UK Real Estate Fund (SCREF) are a much safer way of investing in real estate.

The SCREF grants investors exposure to more than £2.6 billion of UK commercial real estate and is operated and managed by an experienced team. It is one of the safe investments providing monthly income investments for UK property investors and is regulated by the Financial Conduct Authority.

Real Estate Investment Trusts (REITs) are among other safe investments in the property market that can provide monthly dividend funds to UK investors. This type of investment trust is a candidate for inclusion in your investment strategy. You can find out more about REITs here.

Government and corporate bonds

Bonds can be an excellent example of where to invest money to get monthly income in the UK with relative safety. This is because they are less risky than stocks and shares on the stock market.

The safest of all is government bonds, as they are underwritten here in the UK by the UK government. They are also referred to as gilts.

If you’re looking for a safe way on how to invest £10,000 or how to invest £100,000 on one particular investment vehicle, gilts are an option. It would help if you remembered that you would be tying your money up for a specific duration, and the interest rates are not the best.

Corporate bonds are riskier than government bonds.

Cryptocurrencies are high risk

Although cryptocurrencies have shown some fantastic short-term results in the past, they are incredibly volatile and should be approached very carefully.

Cash ISAs and stocks and shares ISAs

ISAs are an excellent tax-free way of investing. A Cash ISA is a good investment choice for your short-term money needs. On the other hand, a Stocks and Shares ISA is a good choice for your medium to long-term financial needs and is a good vehicle for monthly dividend stocks for UK investors.

One recommended way to start investing is to open a general investment account. You can include a Cash ISA, a Stocks and Shares ISA and any other investment asset classes and vehicles you think will offer the best monthly dividend stocks for UK investors.

Determining Your Investment Amount for Steady Monthly Income

One of the most pressing questions for UK investors is how much and where to invest money to get monthly income. The answer isn’t straightforward, as it depends on various factors such as your financial goals, risk tolerance, and the type of investment you’re considering.

Firstly, it’s crucial to assess your monthly financial needs. Knowing how much income you require to maintain your lifestyle will guide your investment decisions. For example, if you need £1,000 per month, you’ll have to invest significantly more in low-yield options like government bonds compared to higher-yield, riskier assets like stocks.

Secondly, consider the rate of return on your chosen investment. Higher returns usually come with higher risks. If you opt for a safer investment like a fixed deposit, you might need to invest a larger sum to achieve your desired monthly income. On the other hand, riskier investments like stocks or real estate might require a smaller initial investment but come with their own set of challenges and uncertainties.

Lastly, don’t forget about taxes and fees, which can eat into your monthly income. In the UK, different investment vehicles have different tax implications. For instance, income from Stocks and Shares ISAs is tax-free, while dividends from individual stocks are subject to tax. Make sure to consult a financial advisor to understand the tax obligations related to your investments.

Managing your tax obligations

When considering stocks that pay dividends monthly to UK investors, you need to be aware of the UK tax year dates for 2022 and 2023. It’s important as this knowledge is crucial to ensuring you plan your income accordingly so that you don’t end up paying more tax than you need to.

Paying taxes is where an ISA tax wrapper wins out. A Stocks and Shares ISA is tax beneficial, providing you stay within your annual personal ISA allowance (which is currently £20,000). Any interest your investment makes is tax-free, as are any withdrawals. You don’t even have to declare them on your tax returns.

Stocks and Shares ISAs comprising UK stocks that pay monthly dividends can therefore be an excellent choice of investment, depending on your investor profile.

If you are considering investing, we recommend you check out our Moneyfarm website investment platform. As well as being one of the top financial advisers in the UK, we are authorised and regulated by the Financial Conduct Authority. The Financial Services Compensation Scheme also covers the investment vehicles we recommend.

FAQ

Can I invest and get paid monthly?

Yes, investing and getting a monthly income from it is possible. However, you need to invest in the right assets that generate regular monthly income.

What is the best investment for monthly income?

There is no one-way-fits-all approach to investing to earn a monthly income. Your risk tolerance, investment objective and budget will determine the best investment that suits your financial goals.

Where to invest money to get a monthly income?

Some investment vehicles you can use to get a monthly income include dividend stocks and shares, bonds, REITs, rental property, peer-to-peer lending, mutual funds and business income.

*Capital at risk. Tax treatment depends on your individual circ*mstances and may be subject to change in the future.