Investing in high-quality dividend stocks is one of the easiest ways to unlock a second income. And deploying this strategy inside of an ISA makes sure that HMRC can’t take a bite out of the profits, even if an investor starts earning the equivalent of a five-figure second salary.
So let’s explore how an investor starting from scratch today can begin building a portfolio that could eventually generate £77,000 in annual dividends.
Running the numbers
Historically, UK shares have offered an average yield of around 4%. But by being more selective, a carefully constructed portfolio can go on to generate more… potentially even as much as 7%.
At this level of payout, to generate a £77k second income, an ISA will need to be worth around £1.1m. Obviously, that’s quite a substantial sum. But thousands of UK investors have already reached this impressive milestone. And given sufficient time, a brand-new portfolio today could eventually do the same.
Assuming the same portfolio also generates 3% in annual capital gains, drip feeding as little as £500 a month could be all that’s needed to become an ISA millionaire with a five-figure tax-free passive income for those with patience.
| Monthly Investment | Time To Reach £1.1m |
| £500 | 30 Years |
| £750 | 26 Years |
| £1,000 | 23.5 Years |
| £1,250 | 21.5 Years |
| £1,500 | 20 Years |
| £1,667 (Maximise ISA Allowance) | 19 Years |
Obviously, averaging a 10% annualised return isn’t guaranteed. And even if a portfolio stays on track, two decades is more than enough time for a stock market crash or correction to potentially materialise and throw a spanner into the works. In other words, investors may end up with less than expected.
Of course, with some intelligent decision-making, the opposite could also be true.
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.
Best 7%-yielding stocks to buy now?
Even with many UK shares delivering stellar results in 2025, there are still plenty of high-yield opportunities for investors to explore in 2026. And one that currently offers just shy of a 7% payout is Ashmore Group (LSE:ASHM).
Since the start of 2026, the emerging market investment specialist group has been on fire with its share price surging by almost 40%. Why? Because after a prolonged downturn in investor appetite for emerging market investments, Ashmore’s finally starting to enjoy increased demand for its products and services.
Emerging market investments have delivered particularly strong returns over the last 12 months. And with the allure of US tech giants starting to wear off, the business is enjoying a strong capital rotation tailwind.
Consequently, in the last six months of 2025, the group’s total assets under management (AuM) jumped 10% to $52.5bn – a multi-year high – driven by a combination of strong investment performance and a return of positive net inflows from clients.
With profits back on the rise, the group’s generous dividends continue to flow into the pockets of shareholders. And with a promising earnings outlook, dividends may be on track to grow in the future.
Of course, the last few years have demonstrated just how cyclical this business can be. While management was able to keep dividends flowing, its AuM and share price are still significantly below 2021 levels. And should geopolitical tensions or trade disputes adversely impact emerging economies, Ashmore’s cyclical recovery could prove short-lived.
Nevertheless, with such an impressive payout and good operational momentum, investors may want to consider taking a deeper dive into this financial enterprise.
