How much do I need in an ISA to earn a second income of £950 a month?
A second income from the stock market can be a real lifesaver — it can help with bills if your hours get cut, cover emergencies, or simply give you more breathing space each month.
In the UK, doing this inside a Stocks and Shares ISA is especially powerful because your dividends and gains are taxâfree, so more of the money actually stays in your pocket.
A pot worth £175k
If you want £950 a month, thatâs £11,400 a year in dividends. To work out how big a pot you need, you divide that by the dividend yield youâre aiming for.
Letâs say you target a 6.5% yield (roughly in the 6%-7% ‘realistic but not crazy’ range). Required pot â £11,400 ÷ 0.065 â £175,000. So very roughly, youâd need about £175k in dividendâpaying shares inside your ISA to get £950 a month at a 6.5% yield.
If your average yield was a bit lower, say 5%, youâd need closer to £228k, if it was a bit higher, youâd need less.
How long could it take?
This sounds like a huge number, but remember youâre not starting from zero and doing this in one year. For example, imagine investing £500 a month into dividend shares in your ISA. Realistically, you could easily target a total return (growth plus dividends) of about 7% a year over the long term.
Using compound growth, it would take roughly 18-20 years to get near that £175k mark if you keep at it and reinvest the dividends along the way. If you can put in £800-£1,000 a month, you could potentially get there in a little over a decade, though of course, markets will never move in a perfectly straight line.
One stock to get started
Primary Health Properties (LSE: PHP) is a good example of the kind of dividend share some investors look at for this strategy. Itâs a real estate investment trust (REIT) that owns GP surgeries and primary care centres in the UK and Ireland. Most of the rent is ultimately backed by the NHS or government bodies, which makes its income relatively steady.
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.
It currently offers a dividend yield of 6.6%, paid quarterly, with an annual dividend of around 7p per share. Its payout ratio is close to 96% of its adjusted earnings.
The company’s grown its dividend for decades, with small annual increases, most recently around 3%. Adjusted earnings per share (EPS) also edged up by about 2%-3% a year, helped by modest rental growth and careful acquisitions.
On the numbers side, it generated net rental income of about £153.6m in 2024, up nearly 3% year on year, and adjusted earnings of roughly £93m, easily covering the dividend.
Final thoughts
Like any investment, Primary Health comes with risk. Rising interest rates can pressure property values and borrowing costs. Plus, it relies heavily on governmentâlinked rents, so changes in healthcare funding or regulation could affect growth.
Still, for a UK investor using an ISA to build a second income, it’s worth considering. It has the kind of traits many people like: long leases to solid tenants, fairly predictable rent, and a chunky yield north of 6%.
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Mark Hartley has positions in Primary Health Properties Plc. The Motley Fool UK has recommended Primary Health Properties Plc. 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, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
