How to Hit an ISA Passive Income Target Equal to the National Living Wage

Reaching an ISA passive income target that matches the National Living Wage is a more tractable goal than it sounds, but the maths requires patience, consistency and a clear-eyed view of what yield a portfolio can realistically sustain. The tax shelter matters enormously: under HMRC rules, income drawn from a Stocks and Shares ISA attracts neither income tax nor capital gains tax, meaning a passive income stream inside one goes further than an equivalent gross salary.

Setting the target: what the National Living Wage actually means in annual income

The National Living Wage for workers aged 21 and over currently stands at £12.71 per hour. A standard 40-hour week at that rate produces roughly £26,400 before tax each year. A tax-free ISA income of the same amount is worth more in real terms than the equivalent wage, because the worker pays income tax and the ISA investor does not. To allow a reasonable margin for inflation eroding purchasing power over the years it takes to build the pot, a round target of £30,000 per year in passive income is a sensible planning figure.

The ISA passive income target: working through the numbers

Three variables drive the outcome: annual contribution, total return during the accumulation phase, and the portfolio’s eventual dividend yield when the investor switches from reinvesting to drawing income. The worked scenario below assumes £13,000 invested per year (£1,083 per month), comfortably within the £20,000 annual ISA allowance. It uses a 9% annualised total return with dividends reinvested during accumulation, broadly consistent with the FTSE 100’s 8.8% ten-year total return. At maturity, the portfolio yields 5%.

None of these outcomes are guaranteed. Markets do not compound at a fixed rate, dividend yields move with share prices, and real-world investors take breaks from contributing. What the table illustrates is the order of magnitude: roughly two decades of disciplined monthly investment, at a yield that does not demand excessive concentration in high-risk income plays.

Hollywood Bowl as a candidate income share

A 5% portfolio yield is achievable without straying far up the risk curve. Hollywood Bowl Group (LSE: BOWL), the leading ten-pin bowling operator in the UK and Canada with 93 centres currently, offers a forward dividend yield of 4.9%, above the FTSE 250 average of around 3.5%. The shares have fallen 17% since 2024, which brings the valuation to a forward earnings multiple of 12. For a market-leading leisure operator still posting volume growth, that is not obviously expensive.

The half-year numbers to 31 March 2026, reported as H1 FY2026, show revenue up 9.5% to £141.5m. UK like-for-like revenue rose 2.6%, with spend per game up 7.6%. Canada like-for-like revenue was up 0.5% in constant currency terms, held back by snowstorms in the period. Group Adjusted EBITDA after rent (pre IFRS 16) grew 8.9% to £42.2m, and Group Adjusted Profit before tax rose 8.1% to £32.1m, according to DirectorsTalk’s coverage of the H1 FY2026 results.

Below the operating line, adjusted earnings per share rose 11.3% to 14.51p, the interim dividend was raised 10.2% to 4.52p, and net cash increased 14.3% to £26m, per Stockopedia’s analysis. The cash generation underpins the payout: for the full year to 30 September 2025, Hollywood Bowl Group’s investor relations page records total revenue of £250.7m and profit after tax of £34.6m. The London Stock Exchange final results announcement confirms the board declared a final ordinary dividend of 9.18p per share for FY2025, subject to AGM approval.

The growth ambition is explicit: management is targeting 130 centres by 2035, up from 93 today. UK inflationary cost pressures remain a real risk to that expansion programme, and they explain part of the share price weakness since 2024. But the balance sheet is clean: net cash of £26m at the H1 FY2026 stage, with no drawings on the revolving credit facility documented in the H1 FY2025 interim results RNS giving context for the trajectory.

A 4.9% forward yield from a profitable, cash-generative operator with room to grow does not cover the 5% portfolio yield assumption on its own. In practice, a diversified income portfolio would blend BOWL with other dividend-paying equities to reach that blended yield, reducing dependence on any single sector. The ISA wrapper then does the rest of the work: compounding those dividends tax-free across the accumulation phase until the portfolio is large enough to generate £30,000 a year without touching the capital.

The next meaningful test for the BOWL investment case is the full-year FY2026 result, expected in late 2026, where the Canada expansion trajectory and UK cost trends will come into sharper focus. If like-for-like momentum holds in the second half, the forward multiple of 12 starts to look increasingly undemanding.