I’m shunning buy-to-let to generate a rising passive income from UK shares

I’m buying UK shares for passive income. Buy-to-let is too much hassle for me.

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I reckon investing in UK shares is a far better way of building a passive income for my retirement than buy-to-let, even though the latter could make me lots of money. Shares are quicker, easier and a lot less taxing than becoming an amateur landlord.

I prefer shares because I can buy them simply and easily. I log onto my online platform, pick the stock I want to purchase, and click ‘buy’. It’s done in seconds. Then I can get on with my life.

I’d buy UK shares instead of a buy-to-let

That makes shares a brilliant way to buy a passive income. Once I have chosen a balanced portfolio of mostly FTSE 100 shares, I don’t really have to do very much. Better still, all my returns are free of income tax and capital gains tax, provided I buy within my £20,000 Stocks and Shares ISA allowance.

I’ll check up on their progress from time to time, to see if my money is in the right place. And that’s pretty much it. While I’m working, I’ll reinvest all my dividends for growth. When I retire, I will draw some of those dividends as passive income to top up my pension. A few clicks and that’s done too.

Better still, that should generate a rising passive income, as top companies aim to increase their shareholder payouts over time. This should help my income keep up with inflation, and maintain its spending power.

By contrast, I can’t see anything ‘passive’ about generating income from a buy-to-let. It looks like a huge amount of effort, with a massive tax burden on top.

I want my passive income to come easily

First, I’d spend time trawling through property portals. Then I’d have to visit properties, pay for a survey, and pay legal fees to a conveyancing solicitor. If I complete, I’ll have to pay stamp duty on top (and landlords pay a 3% surcharge).

At this point, I won’t have generated any passive income. I still have to do up the property, then start the hunt for tenants. That involves interviews, inventories, deposits, and plenty more. Plus there is always the danger that I will install the tenant from hell.

Even if I don’t, I still need to replace them when they move on. As well as fix any problems in the property, and comply with all sorts of complex landlord legislation. Plus my rental income and capital growth is is subject to income tax and capital gains tax.

That’s not for me. I want my passive income to come easily. Buying UK shares takes seconds. Stamp duty is just 0.5%. The only ongoing cost is my platform fee. It is true that I could invest in a share from hell, and lose a lot of money. That’s the risk investors take. But at least I won’t have to call the bailiffs in. I can just sell it.

Company dividends aren’t guaranteed. They can be cut as well as raised. Yet I still think they are the best way to generate a rising passive income for my retirement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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