Please note that tax treatment depends on individual circumstances and may change in the future. This article is for information purposes only and does not constitute tax advice. Readers are responsible for their own due diligence and should obtain professional advice before making any investment decisions.
The UK stock market offers countless passive income opportunities, and a Stocks and Shares ISA provides a tax-efficient way to hold them. Pairing the two can be a winning formula for building long-term wealth. With that in mind, here are three passive income ideas to consider.
First up is Hollywood Bowl (LSE:BOWL), the leading 10-pin bowling operator in the UK and Canada, with 92 centres across both countries. The FTSE 250 stock has struggled recently due to household budget pressures and concerns that summer heatwaves kept families and visitors outdoors. These issues may show up in the firm's upcoming FY26 results, covering the 52 weeks to 30 September. On the other hand, it is possible these risks are already priced in. After slumping 20% since May, the stock's forward price-to-earnings (P/E) ratio is just 10, which looks like solid value. The forward-looking dividend yield stands at 5.7%, and the payout is well supported by forecast earnings, suggesting the dividend will be met, though that is not guaranteed. Over time, I think the stock will bounce back. Hollywood Bowl offers family fun at affordable prices, generates solid returns on capital, and is aiming for at least 130 centres by 2035. As I see it, investors are being paid a decent 5.7% dividend to wait for a potential recovery.
If a single stock exposed to the fragile UK economy seems too risky, City of London Investment Trust (LSE:CTY) might be worth a look. It recently became the first investment trust to achieve 60 consecutive years of annual dividend growth. The share price is also up around 50% in five years, so investors have enjoyed both growth and income. City of London has 76 holdings, including top-quality stocks like HSBC, BAE Systems, Shell, and Tesco, and it can invest up to 20% of the portfolio in overseas companies. Another point in its favour is that Job Curtis has managed the portfolio for 35 years. Over that time, the trust has kept some dividends back in reserve during good times to use when bad times hit, such as the pandemic. Curtis admits that without this long-term thinking, the dividend would have been cut. One key risk to performance is a high weighting to financial stocks; if a banking sector meltdown occurred, the trust could underperform for a while. However, with a starting dividend yield of 3.9%, this is another solid passive income candidate.
Last but not least is Primary Health Properties (LSE:PHP), a healthcare real estate investment trust (REIT) that owns 1,140 properties, mainly GP practices, medical centres, and community clinics. The stock is down 42% in five years due to higher interest rates, and further rises in borrowing costs would put additional pressure on the REIT. However, the stock currently yields 7.4%, more than double the FTSE 250 average. An investor could expect to receive about £370 back each year from a £5,000 investment. The majority of Primary Health's rental income is funded directly or indirectly by a government body, which should add a level of resilience to the dividend.
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