Here’s how I’d target a £45,444 passive income with an ISA!

The number of people using an Individual Savings Account (ISA) has jumped recently. I’m not surprised. These great products allow individuals to invest in a wide range of assets while saving them a boatload of money on tax.

In the 2022/23 period, there were 12.5m adult subscribers to the , according to HM Revenue and Customs. This was up from 11.

8m in the prior year, and was driven by a 722,000 rise in Cash ISA subscriptions as people capitalised on strong savings rates. I own several types of ISAs to target a life-changing passive income when I eventually retire. Here’s how they could help me live a life of luxury in my later years.

A £44,000 saving Any capital gains and dividends an individual receives in an ISA are protected from tax. And over time, this can add up to a considerable amount of money. In a 2024 article, asset manager Netwealth calculated that “ “.

This is based on an average yearly return of 5.9% and excludes trading costs. One drawback with the ISA is that there’s a limit on how much an individual can invest each tax year.

This puts it an obvious disadvantage to a general investment account (GIA). That’s in theory, at least. In reality, less than one in 10 people actually use their full £20,000 allowance each tax year, me included.

I currently own a Cash ISA alongside a Stocks and Shares ISA. I’m also one of a smaller number of people who invest in a Lifetime ISA each year. With the latter product, the government provides a 25% bonus on top .