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Millions of Britons use a Stocks and Shares ISA to invest. It has certain benefits, such as profits not being taxed and dividends also being received without tax. As a result, it can be a handy tool for boosting passive income potential in the year ahead. When specifically targeting income for 2026, here’s how things can get moving fast.
Using the ISA
The maximum amount someone can invest in an ISA per year is £20k. The ISA deadline runs through to the beginning of April, so I’m going to assume the most that could be invested in the 2026 calendar year is £40,000.
Using this figure, the question now turns to the ISA’s average yield. For example, the highest-yielding stock in the FTSE 250 currently is the Bluefield Solar Income Fund, with a yield of 13.05%. So, in theory, if all the ISA were allocated to this share, it would pay £5,220 in 2026. This assumes the stock is bought before any dividend cut-off dates and that the dividend per share remains the same.
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Plenty of buffer room
But I don’t think it’s a smart move to put everything into one stock, especially given the high risk of this company’s exceptionally high yield. Yet the end goal still works out if a diversified selection of stocks is purchased with a much more reasonable average yield of 6%.
In this case, an investor would need £16,670 in the ISA to generate £1,000 in income next year. An important note is that this would need to be done as a lump sum near the beginning of the year to benefit from dividends throughout the year. Of course, not everyone has this amount of money lying around.
Rather, someone might consider investing £500 a month in the stock market. Although this wouldn’t pay out £1,000 in income next year, during year three (2028) it would. Some might see this as a more achievable way to build an ISA portfolio.
Turning it on
There are plenty of stocks that can be included to generate an average portfolio yield of 6%. For example, ITV (LSE:ITV). The FTSE 250 company has a dividend yield of 6.2%, and its share price has risen 11% over the last year.
It makes money from two main areas. One is from advertising, the other is from the Studios division, selling content to global buyers. This diversification is helping the company, with the latest update from November showing year-to-date revenue rising 2%. And with weakness in traditional advertising, it’s the outperformance from digital ads and the Studios arm that’s helping the most.
Looking ahead, I think the streaming and Studios divisions can continue to drive growth, even if the advertising division underperforms. Yet even a modest uptick in advertising could boost investor sentiment significantly, signalling a trend change. The bar for improvement is low, which makes earnings upgrades more likely than downgrades. That being said, a significant fall in advertising is a risk to watch for.
As for the dividend, ITV has strong free cash flow, even in a weak advertising environment. The dividend cover is 1.7, meaning that the current earnings per share almost cover the dividend twice over. As a result, I don’t see it being under threat any time soon, so it could be a stock for investors to consider.
