Passive income is income that requires little or no ongoing active work to maintain, once the initial investment of time or money has been made. The term is widely used in finance and online business but is frequently misrepresented.
The honest picture
Most 'passive income' involves significant upfront work or capital, ongoing maintenance, and tax considerations. True passivity is rare. More accurate: leveraged income — where ongoing returns are disproportionate to ongoing time investment.
Realistic passive income sources
- Rental property: requires capital (deposit), ongoing management or agent fees, and is subject to income tax and capital gains tax
- Dividend investing: requires accumulated capital; small starting yields require large sums for meaningful income
- Digital products or content: significant upfront creation time; ongoing maintenance and marketing required
- Interest income: at 5% on £100,000 savings = £5,000/year — requires the capital first