The beauty of investing for passive income in a Stocks and Shares ISA is that it can be used for many different goals. Whether it’s quitting the day job, earning a small second income, or simply trying to offset the effects of inflation… this tax-free investing account can do the job handily. We might even look towards covering the cost of rental income on an indefinite basis.
The average private rent in the UK has risen to £1,374 a month as of February 2026. How much would be required to hit that amount in passive income?
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How much?
One major issue when trying to withdraw income over long periods is inflation. Whatever your rent is today, chances are it will be higher in the future. That makes planning a lifelong passive income pretty tricky, doesn’t it?
Well, one of the best things about stocks is they are inflation-resistant. Companies increase prices. And the value of stocks tends to go up as inflation does. It’s no accident that indexes have been hitting record highs after a multiple years of high inflation.
This is where the ‘4% rule’ comes in. Based on many backtests, we can reliably withdraw this amount over long periods without running out. The general idea is that the total returns will be more than 4%, which offsets inflation and a bit extra.
Using this rate of withdrawal, we could withdraw £1,374 a month and its equivalent long into the future with an ISA of £412,200.
That’s quite a lot of money, of course. This is why most of us have a period of accumulating and building wealth – a process that can be accelerated with good stock choices.
One choice
One of the Stocks and Shares ISA’s greatest advantages is how it lets ordinary investors get in on the action of some of the most exciting companies in the world. One example is Scottish Mortgage Investment Trust (LSE: SMT), a fund that invests in next-generation growth stocks.
Past winners have included Tesla and Nvidia. Both of those American companies were added to the fund long before the bulk of their success, too. The upcoming SpaceX IPO promises to be another boon for the fund. The $2trn space industry firm is another one of the fund’s choices. These stocks have contributed to the shares going up over 10 times in the last 15 years.
That’s not to say there can’t be bum picks too. Swedish battery developer Northvolt was in the fund before it went out of business. These kind of failures are relatively common in this type of company.
On balance, I think Scottish Mortgage is worth considering for a Stocks and Shares ISA. If performance in the future is as good as it has been, then it might even help to pay lifelong passive income too.
John Fieldsend has positions in Scottish Mortgage, Tesla, and Nvidia.
