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Opening a Stocks and Shares ISA is one of the smartest moves any new investor should consider in 2026. Apart from granting near-unrestricted access to the stock market, ISAs protect a portfolio from any capital gains or dividend taxes. In other words, even if a portfolio makes millions, HMRC’s fingers can’t touch any of it.
Many people are under the illusion that building-wealth in the stock market is solely for the most wealthy in society. But that couldn’t be further from the truth. And even with just £150 a month, a 40-year-old investor can go on to build a pretty chunky £952,435 nest egg for retirement. Here’s how.
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.
Compounding to six-figures
The stock market can be a volatile place. But over the long run, even with this volatility, index investors have earned an average of around 8% a year.
Let’s assume this historically pattern will continue moving forward. And that a 40-year-old, who’s only just started investing, is drip feeding £150 each month into the stock market with plans to retire at age 68.
How much money could they have 28 years from now?
The answer is around £187,285 – about 30% more than the average £145,900 most 64-75-year-olds have in Britain today. That’s pretty nice, but investors can do even better.
Aiming higher
Instead of relying on passive index funds, investors can take matters into their own hands and craft a custom portfolio. Why? Because while this requires more effort, it also opens the door to drastically-improved results.
Fun fact, £150 a month invested at 12% instead of 8% is enough to build a £409,691 ISA. And following the 4% withdrawal rule, that’s enough to generate an extra tax-free retirement income stream of £16,388.
Of course, now the question becomes, which UK shares can deliver such market-beating returns?
Market-beating potential
Looking at the last 20 years, there have been some big winners in the UK stock market, including Hill & Smith (LSE:HILS).
The infrastructure engineering group has generated close to a 16% annualised total return over the last 20 years alone (enough to grow an ISA to £952,435!). And while other big winners such as Goodwin and 4imprint Group operate in different industries, their stories have a lot of similarities.
Each winner capitalised on structural demand in resilient market niches to generate consistent, reliable cash flows protected by a moat of competitive advantages. And even in 2026, Hill & Smith continues to use the same strategy.
Government-backed US infrastructure spending is creating fresh opportunities for the business to grow, while road safety initiatives are doing the same across the UK and Europe. Pairing this with cash flow consistency alongside steady growth, management’s able to prudently allocate capital to target long-term, market-beating gains.
Of course, Hill & Smith’s still exposed to the cyclical nature of infrastructure and construction cycles. Project delays or government budget cuts can have a nasty impact on performance – something the business has recently been tackling in both the UK and India.
Nevertheless, with such a stellar track record, it’s a risk investors may want to consider taking. Obviously, that doesn’t guarantee the stock will continue delivering 16% annualised gains moving forward, especially since its market-cap now stands at £1.8bn. But there’s still plenty to get excited about, in my opinion.
