The Stocks and Shares ISA is a brilliant way to invest for your future. That’s because all the share price growth and dividend income you generate is entirely free of tax… for life.

This can help you manage your overall tax bills in retirement. For example, if you’re in danger of being pushed into a higher tax bracket one year, you could prioritise ISA withdrawals to avoid spilling over.

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.

Building sufficient wealth to generate a sizeable passive income in retirement takes time. What if somebody has 20 years at their disposal, and wants to drawing income from their Stocks and Shares ISA in 2046?

How much do I need in my pot?

Let’s set them a target income of £20,460 a year, which works out as £1,705 a month. How big an ISA they need depends on the yield their shares generate:

• 4% – £511,500
• 5% – £409,200
• 6% – £341,000

Let’s take the middle figure of £409,200 as a target. We’ll assume the portfolio grows at 9.5% a year, which is the average return from a Stocks and Shares ISA over the last decade, according to Investing Insiders.

If they tucked away £600 a month, they’d end up with £426,700. Now £600 a month is a tall order for most of us. If our investor was 30 years from retirement, it’s a lot easier. Investing £225 a month would give them £442,550, assuming the same 9.5% annual return. The sooner you get started, the better.

Today, many build wealth by investing in a spread of FTSE 100 shares, which offer both dividend income and share price growth.

Is this a FTSE 100 stock I should buy?

British American Tobacco‘s (LSE: BATS) been a brilliant source of both. Although smoking’s in decline, it still sold more than 465bn cigarettes sticks worldwide in 2025. That was a decline of 8%, but sales of other tobacco products, such as e-cigarettes, are rising.

Full-year revenues have been flat but still impressive:

• 2025 – £25.61bn
• 2024 – £25.87bn
• 2023 – £27.28bn
• 2022 – £27.66bn
• 2021 – £25.68bn

The group generates heaps of cash, which funds generous dividends. In 2025, free cash flow totalled £5.6bn. The actual figure was £7.9bn, but it was affected by a £2.6bn healthcare settlement payment in Canada. Today, the trailing yield is a juicy 5.7%.

As with any stock, there are risks. That Canadian settlement highlights one. We may also see tougher regulatory action on vapes, as health risks become clear. Plenty of people won’t want to invest in Big Tobacco at all. I’m one of them, but there are lots of other brilliant FTSE 100 dividend growth stocks to consider instead.

Ideally, investors should aim for a portfolio of at least a dozen to spread the risks and maximise the potential rewards. Stocks and Shares ISA benefits are massive, and they compound steadily over time.

Should you invest £5,000 in British American Tobacco P.l.c. right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British American Tobacco P.l.c. made the list?

Harvey Jones does not hold any positions in the companies mentioned.