How much would a Stocks and Shares ISA need to replace a monthly salary of £3,064?

Most people think of a Stocks and Shares ISA as a way to supplement their income. What if it could be completely replaced?

According to the latest figures from the Office for National Statistics, average full-time weekly earnings are £766. This works out to around £3,064 per month.

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It is possible to generate this level of investment income. The question is how large the ISA would have to be for this to happen.

Target income in context

Replacing a monthly salary of £3,064 requires an annual income of £36,768.

Using the commonly used 4% withdrawal rule, this equates to an ISA worth around £919,200.

At first glance, this is a discouraging number.

However, it is worth remembering that the ONS earnings figures are based on gross income before tax. By contrast, a Stocks and Shares ISA is in a tax-free package, which can actually reduce the effective income requirement.

Nevertheless, the scale of the goal remains significant.

The key question is not just the number, but the real time to achieve it.

If an investor puts in £12,000 a year (£1,000 a month), the chart below shows how long it will take to reach a portfolio of £919,200 under various return assumptions.

Chart generated by the author

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Quality mixer in practice

This range of return outcomes highlights why the type of businesses run under an ISA is so critical. Going from lower single-digit returns to closer to 8-10% per year isn’t just a miniature improvement – it can dramatically change your bottom line over time.

An example of a company operating at a completely different level of development quality is Diploma (LSE:DPLM).

The company’s latest half-year results clearly underline this. Revenues rose 17% to £851m, supported by 15% organic growth – well above the long-term trend of 10%. This isn’t putting together low single digit numbers; this is double-digit growth at scale.

Profitability has also increased significantly. Adjusted operating profit rose 33% to £209m, while margins increased 300 basis points to 24.5%. This combination of faster growth and expanding margins is the hallmark of true pricing power, not just volume expansion.

Profit dynamics were even stronger. Adjusted earnings per share increased 36%, reflecting both operating leverage and disciplined execution across the group.

Growth factors

Importantly, it is not controlled with one lever. Diploma continues to grow through a combination of organic growth and disciplined acquisitions, completing 15 transactions over the past year while maintaining a conservative balance sheet with leverage of just 0.8x.

The result is a company delivering growth that consistently ranks well above typical industry peers – the kind of profile that, if sustained, supports the higher return assumptions shown in the ISA chart.

There is risk, especially related to the implementation of acquisitions and maintaining a high growth rate. But the basic quality of the mixing engine is clear to me.

Building an ISA capable of replacing a significant level of income is rarely about a single decision – it’s about consistently having high-quality assets compounded over time.

Diploma is one example of the type of business that can support this journey, but it’s not the only one I’m currently keeping a close eye on.

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Andrew Mackie owns shares in Diploma.