If you’re looking for a sweat-free passive income, a Stocks and Shares ISA is a terrific way to do it. You won’t pay a penny in tax on your dividends or capital gains, for life.

At The Twelfth Magpie, we believe in the power of investing in FTSE 100 and FTSE 250 dividend stocks. Dividends are the regular payments companies make to reward shareholders, and many aim to increase them year after year. They aren’t guaranteed, but can provide a generous and rising income over time. All tax-free inside an ISA.

Never underestimate the dividend

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.

Let’s say an investor had £20,000 to invest today, which just happens to match the annual ISA allowance. Let’s also say they spread it across a selection of dividend stocks and achieve an average annual return of 8%, with dividends reinvested.

After 30 years, their original £20k would be worth a stunning £201,253. And that’s without making any further contributions. Taking 4% of that annually would generate £8,050 a year, or £671 a month, tax-free. That’s a useful second income, although neither the returns nor the withdrawal rate are guaranteed.

Some FTSE 100 companies can yield 7% or more. One that catches my eye is Aberdeen Group (LSE: ABDN), which has a tempting trailing dividend yield of around 6.7%.

Aberdeen’s long road back

Aberdeen has had a torrid time since merging with Standard Life in 2017. The combination created a sprawling asset manager just as active fund management was hit by the shift to cheaper passive index-tracking. Underperformance, lost mandates and customer withdrawals hammered the stock.

In 2021, management ditched the traditional name for abrdn, a vowel-free rebrand that attracted widespread ridicule. The company finally restored Aberdeen to its name in March 2025.

The stock dropped into the FTSE 250 in March 2025, but its fortunes have started to improve. Aberdeen regained its blue-chip status in June 2026.

Is its recovery sustainable?

The shares have rallied sharply in recent months, helped by improved profitability, cost-cutting and the growing success of its Interactive Investor platform. Latest full-year results showed adjusted operating profit up 4% to £264m in 2025, while assets under management and administration climbed 9% to £556bn.

The momentum continued in the first half of 2026, when adjusted operating profit jumped 21% to £151m.

Aberdeen continues to lose money through net outflows in parts of its investment business, while a stock market slump could hit assets, fees and profits. Competition from low-cost platforms remains fierce.

Yet Interactive Investor is growing strongly, costs are being squeezed and management expects adjusted operating profit of at least £300m this year.

I think Aberdeen is worth considering for long-term income-focused investors. I would buy it myself but already own M&G and Legal & General Group, two high-yielding FTSE 100 stocks from the financials sector. There are other FTSE 100 dividend stocks we like at The Twelfth Magpie, including this one yielding a stunning 7%…

What income stock do we like better than aberdeen group right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

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No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Harvey Jones owns shares in Legal & General and M&G.