The date of ISA is coming. This means that all unused tax allowance 2024/25 must be deposited before midnight April 5 or will be lost forever.

Of course, then a up-to-date annual benefit of 20,000 GBP begins. How much tax -free passive income can the investor generate shares of this amount? This is a topic that I want to examine here.

It should be remembered that tax treatment depends on the individual circumstances of each client and may change in the future. The content in this article is provided only for information purposes. It is not to be, nor does it constitute any form of tax advice. Readers are responsible for implementing their own diligence and obtaining professional advice before making investment decisions.

Average index

The answer depends on the investment that individuals buys. Each of them will have their own dividend performance, contributing to the overall portfolio performance.

If the investor puts his 20 grands in Vanguard FTSE 100 UCITS ETF (LSE: vuke), the performance would be 3.46% (as at February 28).

FTSE 100 fell slightly in March, so let’s call it 3.5%. This means that £ 20,000 invested in this index fund FTSE 100 will earn about 700 pounds at the back of the dividend.

Is it good? No, if we are talking only about cash income with a fixed rate, they still offer interest rates of 4.4%. This means that ISA can safely bring $ 880 a year in cash £ 20,000 in cash, exceeding the income from the dividend from the FTSE 100 index fund.

However, FTSE 100 also has the potential to recognize capital, while ISA cash offers security, but there is no growth potential.

For example, ETF Vanguard FTSE 100 increased by 12% last year. So if the investor invested 20,000 pounds 12 months ago, he would now have about 23 100 pounds. It’s a solid return.

Global commercial headaches

However, this year there is no guarantee that the football blue chip. This is a truly global index, which means that many companies stand in front of the perspective of navigating the trade war. This may negatively affect earnings and send FTSE 100 lower from the current level.

To take Diageowhich is the owner of ghosts such as Johnnie WalkerIN GordonAND Tanqueray. It would seem the impact of American tariffs on tequila imported from Mexico and Whiskey from Canada. His brands in these categories – Don JulioIN CasamigosAND Crown Royal – They belong to the most popular among American consumers. So this situation is far from the perfect drinks for the giant.

However, in the long run I am an optimist that FTSE 100 may constantly escalate. Large ingredients AstrasenecIN HSBCIN Rolls-Royceand data analytics company Relx They have very mighty competitive positions and attractive long -term development opportunities.

But this year’s trajectory is very unpredictable, which means that you should consider than just passive income when buying an index.

Striving for higher performance

Alternatively, the investor could decide to implement 20,000 pounds in the portfolio of individual actions in Great Britain, which give much higher than the average.

This must be admitted that this increases the risk, because companies have individual challenges and are not sure of paying dividends. But income investors are blessed because there are so many options on the British market.

Investment company M & GFor example, it has a huge capacity of 9.6% for 2025, while the insurer Legal and general offers 9% withdrawal. If the investor places 10,000 GBP in every actions could expect 1 860 GBP in passive income.

Of course, having only two dividend shares is not advisable. But taking into account the Smorgasbord available options, I think it is possible to build a varied shares worth 20,000 pounds and ISA shares, which give 6.5%. This would generate 1300 pounds of passive income a year.