For some people, the option of building a second income comes through renting out a spare room. The average rent of a single room in Britain in 2026 has risen to £668 a month (excluding inner London). So becoming a part-time landlord sounds like it could be a nice little earner.
But anyone living in the country also has access to that glory of glories: the Stocks and Shares ISA. This investment vehicle can also be used to create a similar income for far less work, much less stress, no taxes to worry about, and for a lot less starting cash than one might think. Let’s look at how.
Hands-off
The biggest advantage, in my view, is how easy the whole thing is. Investing in companies around the world now takes mere seconds. I can open a Stocks and Shares ISA by pausing the doomscrolling for a couple of minutes and downloading an app. That’s a fair sight more convenient than having someone else live in the house.
There’s all the other hassle of renting a room, too. Any income generated is taxed as income – possibly 40% or more taken away. And the new renter’s rights act is introducing a lot more regulations and rules for would-be landlords to be aware of. The ISA, on the other hand, is £20k a year maximum deposit totally tax-free, and the process itself is also largely hands-off after buying the stocks.
As for downsides? There is the startup cost to think about. Aiming for an average 5% yearly dividend yield would require £160k to hit that £668 a month figure – a pretty penny indeed. The lump sum can be brought down with a few years of letting the lump sum grow. Investing in an FTSE 100 index tracker in 2020, for example, brings the cash required to less than £80k instead.
The rub
And that’s really the rub, isn’t it? Good investment choices can make a huge difference in the final result. That’s why I think passive income seekers may wish to consider Aviva (LSE: AV.) shares in their ISAs.
For one, the passive income is among the best on the FTSE 100. The dividend yield currently stands at 6.15%. While dividends are never guaranteed, the business of selling insurance and retirement services offers stable earnings that typically grow with inflation. That might be why one reason why the dividend has grown an average of 6% a year over the last decade.
As for risks, the ever-changing nature of interest rates poses a problem for companies that plan so far ahead. A shift up or down in rates – as we have seen recently – can change the value of a rather large asset pile. Moreover, this isn’t easy for a newbie investor to understand.
On the whole? A good Stocks and Shares ISA should be diversified with a number of different stocks. But for those wanting to maximise their passive income, I think Aviva is worth a look.
