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Many investors aim to build a second income, and a £20,000 Stocks and Shares ISA is often seen as a way to get there.
On paper, targeting £2,400 a year in income from that amount implies a 12% yield.
The problem is that a 12% sustainable income return is extremely rare in today’s market. Where it does exist, it usually comes with significantly higher risk than most long-term investors would accept.
So while the £2,400 figure can be a useful goal, it is not something that can realistically be generated from £20,000 in a single year. Not without taking on considerable risk.
A more practical approach is to treat it as a compounding target. One built over time through reinvested dividends, capital growth, and gradual portfolio expansion.
In that context, the question isn’t whether £20,000 can generate £2,400 immediately, but how it can be structured so that income steadily grows towards that level in a sustainable way.
With that in mind, here’s how a £20,000 ISA portfolio could be structured to focus on building sustainable long-term income.
Core holding
One of the longest-held positions in my ISA portfolio is insurance group Aviva (LSE: AV.). The recent market sell-off has pushed its dividend yield up to around 6.6%, but that isn’t the main reason I hold it.
As the UK’s largest general insurer and a growing wealth business, Aviva generates relatively stable cash flows from premiums and long-term savings products, which supports its ability to return capital to shareholders.
The attraction here isn’t just income, but the durability of the business model. Insurance companies don’t rely on rapid growth. Instead, they depend on disciplined underwriting, cost control, and consistent capital generation over time.
The key risk remains exposure to economic cycles and investment market volatility, which can affect returns. However, over the long term, it is precisely those investment returns that underpin both dividend growth and shareholder payouts.
Dividend workhorse
To complement individual equities, I also own a number of investment trusts, including The City of London Investment Trust (LSE: CTY), one of the UK’s longest-running dividend-focused investment trusts.
Its strategy is straightforward: invest in a diversified portfolio of established UK companies and prioritise consistent, growing income over time. That includes major dividend payers such as HSBC, Shell, Tesco, and Legal & General, alongside financials like Lloyds and NatWest.
What makes it attractive is its track record of increasing dividends through multiple market cycles, which helps smooth income generation inside an ISA.
The trade-off is that it remains exposed to the UK market and broader economic conditions, meaning capital values can fluctuate even if income stays relatively resilient.
Building a second income over time
Together, these two holdings show how I’d approach building a second income within a Stocks and Shares ISA. Aviva provides a core source of relatively stable cash generation, while the City of London Investment Trust adds diversification and a long track record of growing dividends.
Importantly, this isn’t about generating £2,400 overnight. It’s about building a portfolio that can steadily increase its income over time through reinvestment and disciplined stock selection.
In that sense, the ISA becomes less about chasing yield and more about creating a resilient income stream that can grow year after year.
