Imagine revealing that a Stocks and Shares ISA generated £100,000 every year in tax-free dividends. In some cases, people hearing that might not even believe it, as it sounds like the stuff of dreams for many.
Yet we know some investors are likely enjoying this level of passive income because the latest HMRC data showed there were over 5,000 ISA millionaires in the UK today. And the average pot among the top 25 investors was a staggering £11.3m!
However, that data was from the 2024/25 tax year. And since then, the stock market has boomed, with the FTSE 100 returning more than 30%, including dividends.
Admittedly, markets bombed in April 2025 after President Trump’s tariff bombshell. So that was a lower starting point, making these figures look unusually strong for such a short space of time.
Nevertheless, there will almost certainly be more ISA millionaires now, with many of them generating sizeable second incomes.
Here’s how it’s possible to join them.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Regular investments
To generate £100k a year in dividends, a 6%-yielding ISA would have to be worth approximately £1.67m. That sum may sound unobtainable at first. But as mentioned, there are thousands who have already built ISAs of this size.
Moreover, they didn’t have any unfair advantages when starting. A billionaire can’t stick £5m straight into a Stocks and Shares ISA to shield it all from tax. They’re restricted to the same £20k per year limit as everyone else.
Of course, in reality, not everyone can afford to put away £20k every year. Especially in today’s never-ending cost-of-living crisis.
For our purposes here then, I’m going to assume that someone invests half that amount. That’s the equivalent of £833 a month.
The long-term average total return of UK stocks is around 8% per year. But with careful research and savvy stock picks, it’s possible to target an average of 9%.
In this scenario, it would take approximately 32 years to reach £1.67m and £100k in passive income (excluding brokerage fees).
For someone maxing out the £20k limit at a 9% return, it would fall to 25 years. All figures assume reinvested dividends.
6.6% yield
The UK market is home to hundreds of dividend shares, including LondonMetric Property (LSE:LMP). This is a FTSE 100 real estate investment trust (REIT) that owns distribution centres, hotels, and healthcare, entertainment and retail properties.
Yesterday (13 January), it was announced the company had snapped up a handful of Premier Inn hotels for £89m, bringing its ownership to 22.
In November, its portfolio had an impressive occupancy rate of 98.1%.
As we can see above though, the stock has struggled in recent years as interest rates have soared. Higher rates have increased debt service expenses and made portfolio growth more expensive.
Moreover, as a REIT, LondonMetric has to dish out 90% of its rental profits as dividends, leaving it to rely on more expensive debt to operate. So this isn’t a risk-free investment.
However, with interest rates gradually heading lower, 2026 might mark the start of a turnaround for REITs. This one currently offers an attractive 6.6% forward-looking yield.
With its high-quality property portfolio, high yield and the possibility of a turnaround, I reckon LondonMetric stock is worth checking out at 193p.
