Not everyone is fortunate enough to start investing with a chunky lump sum in a Stocks and Shares ISA. For some, perhaps most, they will have to start from scratch with quite modest amounts invested weekly or monthly.
The good news is this tortoise-like approach can still win the race to produce attractive tax-free dividends.
To give an example, let’s assume an investor wants to aim for a £15,000 second income. How long might it take to get there? Let’s find out.
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.
Simple maths
When an investor buys shares of a dividend-paying company, they will obviously calculate what level of income to expect. They can work this out by the stock’s dividend yield.
Take Londonmetric Property (LSE:LMP), for instance. This FTSE 100 real estate investment trust (REIT) currently offers a 6.3% yield, which means someone should get back £63 in annual dividends from every £1,000 they invest.
However, dividends are never assured, and the dividend could end up being lower. In an extreme case, the REIT could even cancel its payout completely.
Needless to say, that wouldn’t be great news for its share price or investor confidence.
How long to reach £15k?
Let’s stick with that 6.3% figure mentioned above. An ISA portfolio yielding this would need to be worth roughly £238,000 to generate £15,000 a year.
As this is a substantial sum of money, and far exceeds the annual ISA contribution limit of £20k, it would need to be built towards over time. How long exactly would come down to two things: how much they invest regularly and the portfolio’s rate of return.
If someone starting from scratch invested £700 a month, it would take them just under 15 years to reach £238k (discounting any platform fees). This assumes an 8% average stock market return, as well as the reinvesting of dividends to supercharge the portfolio’s progress.
For someone who could afford to invest £1,666 a month to max out the annual ISA limit, it would take about eight-and-a-half years.
Investing in property
Returning to LondonMetric Property, I think this could be a great income stock to consider buying for an empty ISA. It has a £7.4bn portfolio of properties that generate contracted rent of £421m per year.
Top assets include Alton Towers Park, Manchester Arena, Warwick Castle, private hospitals, and various logistics warehouses let to Primark, Argos, Aldi and others. In January, LondonMetric snapped up nine Premier Inn hotels for £89m.
In the six months to 30 September, net rental income increased 14.6% to £221.2m, which included three months of contribution from its acquisition of Urban Logistics (another REIT).
Over the past two years, earnings and dividends per share have both grown by over 27%, putting us on track for our eleventh year of dividend progression as we strive for dividend aristocracy.
LondonMetric CEO Andrew Jones, November 2025.
One challenge here, though, is elevated interest rates. If these stay higher for longer than expected, it could make any new financing or refinancing of maturing debt more expensive.
On balance, however, I think LondonMetric’s focus on growing sectors like logistics, healthcare, and entertainment, as well as its high 98.1% occupancy rate, make it worth considering.
As mentioned, individual dividends aren’t guaranteed. So a diversified ISA of stocks is important when aiming for reliable passive income.
