By ROSIE MURRAY-WEST and SIMON LAMBERT, This is Money, 18 March 2025:
An income you don’t have to work for is often seen as the preserve of fortunate ‘trustafarians’, whose families use trusts to pass wealth down through the generations.
But you can use your Isa to provide your family with a source of tax-free money, too.
The trick is to choose investments that pay out a regular income.
As long as they are sheltered in your Isa, the income paid out is completely free from tax – a welcome top-up for your salary or pension that you don’t have to declare to HM Revenue & Customs.
Pick wisely and you could achieve a steady, sustainable income. However, it is not simply a matter of selecting investments that pay out the most, as our experts reveal.
What investments should you choose?
Some investment trusts, funds and companies pay out income in the form of dividends. These are payments made to shareholders as reward for investing..
To discover whether an investment will provide you with an income you need to look at the ‘yield’. This is the amount of money the investment will pay you regularly compared with the price of the investment itself..
Five steps to resilient income
- Seek dividend heroes Investment trusts..
- Add fixed income Issuers pay a fixed amount – a ‘coupon’ – for money borrowed..
- Specialists Add a small number of niche investments. They’re riskier, but yields are high. James Carthew, head of investment companies at researchers QuotedData, suggests Bluefield Solar, whose yield is 9.9 per cent.
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