When opening a Stocks and Shares ISA, new investors often ask me a simple question: how much could this actually make?
The honest answer depends on time, consistency, and return rates. But one thing is clear — the ISA itself gives you a powerful head start.
Any capital gains and dividends earned inside an ISA are completely tax-free. No income tax. No capital gains tax. That means more of your returns stay invested and compound over time.
As Vanguard founder John Bogle once said:
“Time is your friend; impulse is your enemy.”
And nowhere is that more obvious than with long-term ISA investing. So what happens if you put that into practice?
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.
Calculating potential income
Over the 10-year period between 2016 and 2026, the Vanguard FTSE 100 ETF achieved a total return of 143% (with dividends included). That equates to an annualised return of 9.3% per year.
If it maintained similar performance over the next decade, a £500 monthly investment would compound to £99,678 by 2036.
In other words, a total invested amount of just £60,000 would deliver £39,678 of passive income.
That’s already a favourable return, but if held for a further 10 years, it could skyrocket to £350,146. At that point, the returns would have significantly outpaced the £120,000 invested.
This illustrates the power of starting early and compounding the investment for as long as possible.
But while an index-tracking ETF is a good way to capture broad market growth, individual stock picking can achieve even greater returns.
Which stocks deliver the most passive income?
Dividend stocks are often the go-to for passive income. But chasing the highest yield can backfire. Companies offering yields above 7% often struggle to sustain them.
Common risks include:
- Weak earnings failing to cover dividends.
- High debt levels squeezing cash flow.
- Sudden dividend cuts during downturns.
A yield around 5%–7% tends to be more sustainable.
Look at Hilton Food Group (LSE: HFG), for example.
It’s not the first name that pops into many people’s heads when thinking about dividend income.
But it offers a decent 6.5% yield backed by a solid 20-year track record. Its cash flow covers dividends by 2.93 times and earnings only account for 65.4% of payouts.
So what’s the catch?
Recently, a sharp profit dip irked investors, leading to a 38% price drop in 2025. But an aggressive business overhaul has seen the appointment of a new CEO and a refocus on its core meat business.
Subsequently, revenue jumped 11.9% in H2 2025 to £4.2bn and it managed to increase dividends by 1.4%.
With the future now looking more promising, the low price could be an excellent opportunity for value hunters.
The group’s price-to-earnings growth (PEG) ratio is an attractive 0.46, so the price could still rally once the market realises the growth potential.
The bottom line
Hilton certainly has potential and I think it’s a good income stock to consider, but nothing is risk-free. A recovery isn’t guaranteed and margins in food production can be tight.
So while the income looks appealing, investors need to stay realistic.
When targeting passive income, a Stocks and Shares ISA is a good start. However, it must be combined with disciplined saving and a carefully curated portfolio of proven income stocks.
Mark Hartley has no positions in the shares mentioned. The Twelfth Magpie has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor and Hidden Winners.
