With the cost of living continuing to rise, having a tax-free passive income from a Stocks and Shares ISA can ease the burden. Even having an extra £1,000 coming in each month can be a massive help. But how big does an ISA need to be to generate this sort of monthly income?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Crunching the numbers

There are lots of different ways to earn a passive income in the stock market. The most popular is arguably investing in dividend shares. But for investors like me who prefer owning more growth-oriented businesses, it’s still possible to generate an income by trimming a few shares each month.

If the goal is to earn £1,000 a month, or £12,000 a year, then following the 4% withdrawal rule means I’ll need a Stocks and Shares ISA worth around £300,000.

Obviously, that’s not pocket change. And for many, it might seem out of reach. But it’s actually a far more achievable goal than what most might think.

How can I make £300,000?

Let’s say I’m starting from scratch today, and my ISA portfolio matches the UK stock market’s average performance of generating an 8% annualised return. Then, by simply investment my £20,000 annual allowance for 10 years would result in an ISA worth £304,971.04.

Of course, not everyone has the luxury of being able to invest roughly £1,667 each month. But the good news is, even with £500 to spare on a monthly basis, the destination is still achievable in just over 20 years.

But being patient for two decades is obviously less than ideal. So beyond investing more money, is there another way to accelerate the wealth-building process?

How to target bigger gains

Instead of matching the stock market’s average return, investors can seek to beat it with a custom-crafted portfolio of hand-picked stocks. And by owning the right businesses, the returns can be game-changing.

Take Goodwin (LSE:GDWN) as a perfect example. Over the last 10 years, anyone who’s been reinvesting dividends has earned a staggering 24.06% annualised return – three times the stock market average!

At this rate, drip feeding £500 each month would now be worth £245,104.05 – 82% of the way towards the target of £300k in half the time. And those investing £20,000 a year over the last decade are now sitting on a staggering £817,176.92!

Is Goodwin still a buy?

The company’s a family-controlled precision engineering group that’s embedded in a series of multi-decade contracts, with some running into as late as the 2060s, providing management with exceptional revenue visibility.

With Goodwin recently repositioning its business to focus on higher-margin defence and nuclear contracts, trading profits across the first six months of its 2026 fiscal year (ending in April) have more than doubled from £17.1m to £37.2m. And the long duration of Goodwin’s contracts organically creates structural tailwinds, granting impressive operating leverage.

Of course, this strategic pivot also has its downsides. Both the nuclear and defence industries are complex, technically demanding, and heavily regulated. Contract delays, changes in design requirements, or political priority shifts could all adversely impact the future order book and profit timelines.

So is the risk worth it? That ultimately depends on an investor’s individual risk tolerance. But in my opinion, Goodwin has the hallmark traits of an exceptional quality compounder that deserves a closer look.