There’s a lot of conflicting advice around when it comes to stock market investing, but one thing many people agree on is the benefits of a Stocks and Shares ISA.

Like a Cash ISA, it offers significant tax benefits — but, in my opinion, the key advantage is the flexible investment options. Rather than settle for a moderate cash return, investors can put a wide range of assets in their ISA to target outsized gains.

Yes, it does require a bit more planning and research — but as the saying goes: nothing worth doing is easy!

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.

So how much does an investor need in an ISA to target a sizable passive income of £15,000 a year?

Let’s do some basic maths

Naturally, the best amount to invest every month is as much as you can afford. But for the sake of this experiment, let’s say you can put away £400. For most UK citizens, that’s realistic — even if it means trimming some unnecessary expenses.

After a year, you’d have invested £4,800 into your ISA stock picks. Let’s say you target high-yielding dividend stocks like major FTSE 100 insurer Standard Life (LSE: SDLF).

It’s a solid option to consider, because it consistently yields between 6% to 10%. Build a portfolio of stocks like that, and you could be averaging an 8% annual return.

But 8% of £4,800 is only £384 — far off £15k. That’s where the magic of compounding becomes necessary. Keep reinvesting those returns back into the ISA and watch it grow to £187,570 in just over 17 years. Now, your 8% portfolio is returning over £15,000 a year.

Seventeen years isn’t that long when you think about the benefits: £15k on top of a basic State Pension equates to a comfortably livable retirement income.

Why Standard Life looks good now

Clearly, I’m bullish about Standard Life or I wouldn’t be holding the stock. But it isn’t just because of the meaty yield — the company exhibits the fundamentals to back a long-term investment thesis.

The share price has taken off in the past year, up 33%. That’s well ahead of competitors such as Aviva and Legal & General. On top of that, it’s been increasing its annual dividend at a rate of 3.18% for the past decade.

That’s important when investing for retirement income — if the dividend isn’t increasing in line with inflation, you’re losing income every year.

Here’s its 2025 results, compared to 2024:

However, on valuation it looks more expensive than some rivals. That means any earnings miss or reduced guidance in the next results could lead to a short-term price dip. Still, on balance, it looks like a company heading in the right direction. 

The bottom line

For those considering building a second income stream for retirement, a Stocks and Shares ISA can make a huge difference. Especially when packed full of high-yielding income shares.

But remember, dividends aren’t guaranteed, so dig deep and find those companies that are consistent, reliable and transparent. With a strong portfolio, £15k a month becomes a realistic target.

What income stock do we like better than Standard Life right now?

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And the best bit is that you can see if for yourself, right now, absolutely free of charge!

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

Mark Hartley owns shares in Standard Life, Aviva and Legal & General.