Got £20k left over for a Stocks and Shares ISA? Here’s how I can make an income of £1,400 by 2026!
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The start of a new year can be a good time to think about how to make more money. One simple but powerful idea to generate passive income would be to load an ISA with Stocks and Shares and stakes in quality businesses that look set to pay good dividends.
Making the most of your ISA allowance
For most people, the annual contribution allowance for a Stocks and Dividends ISA is £20k.
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Therefore, a person can deposit up to £20K between now and the first week of April, if they have not already done so during this tax year. Then, as the new tax year begins, they can do the same again.
Fees, commissions and other charges can eat into the income generated by an ISA.
So it pays to take your time when choosing a Stocks and Shares ISA.
Earning money for the work of others
How much income an ISA produces will depend on the average return on its shares.
Say someone earns a 7% yield. That would equate to £1,400 a year in passive income.
From today, that could mean £1,400 this year alone, and in subsequent years.
Assignments have never been confirmed, however. It is therefore important to focus carefully on the quality and quantity of selected stocks.
Holding a Stocks and Shares ISA is diversified and is a simple but important risk management strategy, should one company disappoint.
In the meantime FTSE 100 the yield is 3.1%, so my goal may seem ambitious. But in today’s market I think it’s realistic even for a diverse selection of blue-chip FTSE 100 businesses.
One income share to consider
For example, one aspect of the FTSE 100 dividend that I think investors should consider Phoenix The group (LSE: PHNX).
Not a household name. That explains why it plans to change its name to Standard Life plc in March. That will help Phoenix get more out of one of its best-known brands.
Standard Life is just one of the businesses in Phoenix’s stable of long-term retirement and savings companies. With almost 12m customers, Phoenix is a huge business with huge potential to make money.
That’s important from an income perspective, as that cash generation can help fund shareholder payments.
Phoenix intends to increase its dividend annually, as it has done in recent years. Although its share price has risen over the past year, the stock still yields 7.5%.
That share price performance partly reflected some investors getting more excited about the business’s long-term potential.
I can see the risk that its loan book could take a bigger loss than planned if the property market crashes. Rebranding will bring costs that could eat into 2026 profits.
However, I see Phoenix as worth considering for a Stocks and Dividends ISA given its strong income potential.
