How much money is needed in an ISA to get an income of £35,828 from FTSE shares?
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You wish to quit your job and live on just one income FTSE 100 stocks? I agree. Most Brits currently live off the income from UK dividends. Many of them have even been able to retire early.
I build a portfolio of global stocks with both of these goals in mind. And I use a Stocks and Dividends ISA and multiple SIPPs to get there, using the tax free benefits to help me grow my wealth.
The question is, how much would you need in an ISA to replace your income in the same way as income from shares? Let’s take a look.
Directing income
In this example, we will use the figure provided by the Office for National Statistics (ONS). According to them, the average British salary is £35,828.
You may be earning more or less than this. But it gives us a good ballpark figure to aim for.
So how big would one’s nest egg have to be to replace this salary with dividends? It all depends on the dividend yield your portfolio generates. The higher the yield, the smaller your ISA needs to be, as shown here:
| Return yield | Portfolio the size |
|---|---|
| 5% | £716,560 |
| 6% | £597,133 |
| 7% | £511,829 |
| 8% | £447,850 |
| 9% | £398,089 |
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
Building ISA wealth!
The benefits of owning high-yielding stocks are obvious. But this comes with added risk, as sky-high yields may be unsustainable in the long run. They can also point to a struggling company whose share price has increased its yield.
A solid strategy that balances risk and reward, would be to target an average yield of 7% and a list of high paying businesses. For that, you’ll need an ISA worth £511,829.
That’s a lot of money. But by investing small and often in FTSE 100 stocks, it is a very realistic goal. Take the following five blue-chip stocks, which have delivered an annualized return of 17.3% over the past five years:
| FTSE stock | 5-year average annual return (share price growth + dividends) |
|---|---|
| Scottish Mortgage Investment Trust | 18.1% |
| 3i Group | 20.2% |
| BAE Systems | 16.7% |
| HSBC | 14.2% |
| Rio Tinto | 17.4% |
| AVERAGE | 17.3% |
What if an investor put £200 every month into these FTSE 100 companies today? If they can repeat their performance of the last decade, the investor could reach that target of £512k in just over 21 years.
This ‘mini-portfolio’ offers a combination of high growth, value, and dividend stocks, providing stability over the long term. Not all stocks on the Footsie list have delivered this kind of impressive return, of course. But my example shows the potential returns from the UK stock market.
The highest number of FTSEs
HSBC is a share that I think can continue to deliver double-digit returns each year. Why? It offers a good combination of growth and profitability potential, supported by its growing focus on emerging markets.
FTSE Bank is selling assets in mature regions to prioritize its Asian markets. The reason is obvious – the combination of rising personal wealth and population levels can increase cash flow and profits through the roof. HSBC has the product strength to continue to capitalize on this opportunity, and a strong balance sheet to fund product and regional expansion.
The Iran war could impact HSBC’s earnings in 2026 as Asian economies take a hit. But the long-term picture remains as strong as ever, with the region’s retail banking sector expected to grow by around 7% each year through 2035.
