For UK investors, a Stocks and Shares ISA is a powerful tool available to help deliver long-term wealth. And with all income and capital gains earned tax-free, it’s possible for an individual to achieve their personal investment objectives quicker than might otherwise be the case.
So how much does an ISA need to be worth to deliver £800 of passive income each month? And how long will it take to reach this level? Let’s find out by doing a bit of number crunching.
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.
Some maths
Adopting the 4% rule and gradually withdrawing the capital from the investment pot, an ISA would need to be worth £240,000 to provide £800 a month (£9,600 a year).
Alternatively, an individual wishing to preserve their capital could buy some dividend shares. By way of an example, the yield on the FTSE 100 is currently (13 March) 2.8%. With a return like this, an ISA would need to be valued at £309,677 to deliver £800 a month. However, I think it’s possible to do better than this.
Such as?
Take HSBC (LSE:HSBA) as an example. Based on dividends paid over the past 12 months, it’s currently yielding 4.7%. With this level of return, an ISA of £204,255 would be needed to earn £9,600 a year.
Admittedly, this yield isn’t as good as the headline rate available from one of the bank’s regular savings accounts of 5%. However, most savers will have to pay tax on this. And it’s only possible to pay in a maximum of £3,000 over a 12-month period.
By contrast, subject to the annual investment limit of £20,000, there’s no restriction on the value of HSBC shares that can be held in an ISA, nor the level of dividends earned. And remember, any gains and income can be enjoyed tax-free. A word of warning though, dividends can never be guaranteed.
However, in my opinion, there are other reasons to consider the bank’s shares.
An impressive record
Of the FTSE 100’s five banks, HSBC ranks third comparing their historic (trailing 12-months) price-to-earnings ratios. And in 2025, its adjusted profit before tax grew 7% year-on-year.
For the same period, HSBC reported a 13.3% return on tangible equity. But for 2026-2028 it’s now targeting 17%, or more. The strength of its balance sheet means it retains enormous financial firepower and its brand is instantly recognisable across the world.
But there are challenges. Its margin (and earnings) could come under pressure if interest rates fall further. And an economic slowdown would be damaging, especially in Asia. The group’s already suffered heavy losses from the meltdown in China’s property market.
However, with its excellent track record of delivering income and growth, I think it’s an exciting stock to consider for a Stocks and Shares ISA.
Over the past five years, the bank’s share price has grown by an average of 24.9% a year. At this rate an investment of £3,000 a year would grow to an astonishing £1.246m within 25 years. Then, assuming HSBC’s current yield of 4.7% still applies, it would be producing an incredible second income of £58,562 a year.
Of course, it’s important to have a diversified portfolio. And there are plenty of other UK shares available that could complement HSBC in a high-performing Stocks and Shares ISA.
