Five AIM income stocks for your ISA in 2026
Award-winning AIM writer Andrew Hore names the handful of smaller companies with attractive dividend yields that investors might consider for ISA portfolios.
27th March 2026 15:39
by Andrew Hore from interactive investor
It is coming to the end of the 2025-26 tax year and the chance to make the most of the ISA allowance. Here are five AIM shares I believe offer attractive growing dividends that are tax free in a stocks & shares ISA, which provide a good yield as well as the potential for share price growth.
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James Halstead (JHD)
120p
Forecast yield: 7.5%
Floor-coverings manufacturer James Halstead (LSE:JHD) appears to be one of the companies hardest hit by the reduction in the inheritance tax (IHT) rules for AIM shares. The amount of tax relief you can get through investing in AIM-listed companies will be cut from 100% to 50% from 6 April. James Halstead was a favourite for many IHT portfolios. The share price has fallen by more than two-fifths since the Budget announcement in 2024. There has been a lack of profit growth in the past couple of years, but management has managed to continue to generate cash.
Early this year, UK, North America and Middle East markets were strong, although the outlook for the Middle East is now uncertain. Europe and Asia were tougher markets. In the first half, sales were slightly lower, but James Halstead is still expected to increase full-year revenues from £262 million to £275 million, while pre-tax profit could rise from £55.1 million to £57.5 million. Net cash could be one-fifth higher at £80 million.
There are plenty of international expansion opportunities. The UK market could also improve. Profit is expected to rise steadily but better economic conditions could accelerate the improvement.
The dividend is set to increase from 8.8p/share to 9p/share. That dividend would be covered more than 1.1 times by earnings. Further steady growth in dividends is forecast, and the cash should also increase, providing potential for a special dividend. The shares are trading on less than 12 times prospective earnings, which is much lower than in the past. There is an attractive, rising dividend and potential for steady growth. Buy.
Personal Group Holdings (LON: PGH)
335p
Forecast yield: 7.3%
Employee benefits and insurance provider Personal Group Holdings (LSE:PGH) increased its dividend by 41% to 23.3p/share on the back of a 23% rise in pre-tax profit to £8.4 million. When the company was paying quarterly dividends, the total annual dividend peaked in 2019 at 23.32p/share – the uncertain outlook led to a rebasing of the dividend at a lower level. The strategy is to pay dividends equal to earnings.
Personal started out providing hospital cash plans and voluntary group income protection plans to the employees of large organisations. The range of workforce benefits has broadened over the years. The Hapi app enables Personal to access employees more easily and generates transactional income on a software as a service (SaaS) basis.
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Revenues were 11% higher at £48.4 million in 2025 and annualised recurring revenues are £48.6 million. Pre-tax profit from continuing operations rose from £6.83 million to £8.41 million. Cash was £29 million at the end of 2025.
The insurance division improved its EBITDA (profit) contribution from £12.4 million to £14.6 million, while the benefits and reward division contribution increased from £13 million to £13.8 million. This is before central costs.
Canaccord Genuity forecasts 2026 pre-tax profit of £10.2 million, but earnings will grow more slowly because of a higher tax charge. That will hold back dividend growth to an estimated 24.3p/share.
Strong recurring revenues and the cash pile mean that the board can be confident that the dividend policy is achievable. Buy for growing income.
Soft drinks maker Nichols’ well-known brands include Sunkist and Vimto. Credit: Kevin Carter/Getty Images.
Nichols (NICL)
928p
Forecast yield: 5.2%
Soft drinks maker Nichols (LSE:NICL) intends to reduce dividend cover from 2 to 1.5 times. The total dividend for 2025 is 33.7p/share, which is based on the old policy. The new dividend policy comes into effect in 2026 when the dividend could be 48p/share, if pre-tax profit reaches £35.1 million as forecast.
Nichols owns well-known brands including Vimto and Sunkist. In 2025, pre-tax profit improved from £31.4 million to £33.6 million, on revenues less than 2% ahead at £175.1 million. There was growth in the UK and internationally for the soft drinks supply business. International revenues were flat, but that was due to a change in the business in Africa to concentrate supply, which improves margins.
The out of home division was a problem, but it has been restructured. Last year it maintained its profit contribution as lower margin business was exited.
Pre-tax profit margin rose to 19.2%, which is approaching the medium-term target of 20%. The improvement is set to continue.
Net cash was £55.7 million, and the higher dividend should not stop this continuing to increase unless suitable acquisitions are found. There have been special dividends in the past and the increasing cash means that there is potential for another special dividend in the future.
The prospective multiple is 13, which is low for a business with high-profile brands. Like James Halstead, the share price has fallen back since the IHT changes. This provides a buying opportunity.
Fonix (FNX)
147.5p
Forecast yield: 6.3%
Mobile payments and messaging technology services provider Fonix Ordinary Shares (LSE:FNX) has grown rapidly and generated large amounts of cash since joining AIM. Normally, three-quarters of earnings are paid in dividends, but some years it is more.
Fonix has developed its own platform that enables broadcasters to launch competitions, marketing campaigns and find other ways of generating revenues. Each transaction it handles generates a small percentage commission for the company, and part of this income goes on fees paid to the telecoms carrier. ITV has been a client for a decade, and other clients are major broadcasters such as Global, Bauer Media and RTE.
Fonix is expanding internationally. It has moved into Ireland, Portugal and Switzerland. There are plans to move into France following a recent management appointment. Ireland is already 12% of gross profit and this is the first full year for Portugal, which could generate £500,000 in 2025-26. Switzerland is still at the pilot stage.
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New products will also help growth. Payflex provides an alternative method of payment that will improve conversion levels. CompsPortal enables competitions to be extended to online. RCS provides messaging with interactive content and embedded payment methods. The last two are being piloted.
Fonix has a strong market position in the UK, but additional products and international expansion can fuel further growth. Profit growth has slowed as Fonix invests in new products and markets, but growth should accelerate when these investments start to pay off.
Pre-tax profit is set to improve from £14.3 million to £15.2 million in the year to June 2025, rising to £15.9 million next year before increasing to £17.5 million in 2026-27 as the newer products and markets make more significant contributions.
Dividends have continued to grow steadily and there was also a 3p/share special dividend for 2024-25. The underlying dividend is set to increase from 8.8p/share to 9.3p/share. The prospective 2024-26 multiple is 13. Buy for growing income.
Gattaca (GATC)
112p
Forecast yield: 3.6%
Management has been improving the performance of Gattaca (LSE:GATC) over the past few years, following the low point in 2021-22. This has enabled a return to dividends and a steady growth in the payment.
Gattaca is a specialist staff provider with a broad spread of sectors. It is involved in areas where there is a shortage of skilled candidates. Defence is an important sector, but surprisingly that was not as strong as might be expected in the first half because of delays in government spending. The outlook is better, though. Infrastructure is currently the largest contributor to net fee income. Investment in water is growing.
The energy sector is growing on the back of investment in nuclear and the electricity grid. Mobility and digital technology are the other main sectors.
In the six months to January 2026, net fee income improved 13% to £21.4 million with a like-for-like increase of 8%. Cyber-security focused InfoSec was acquired at the beginning of the period. Permanent income was lower because of caution about hiring new employees and this was offset by higher contract staff income.
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Pre-tax profit trebled to £3 million, which was helped by increasing efficiency. Net cash was £13 million at the end of January 2026.
The interim dividend was raised by one-third to 1.33p/share and the total dividend for the year is likely to be increased by a similar proportion to 4p/share. Pre-tax profit is expected to rise from £3.3 million to £4.5 million, which means that the dividend would be covered 2.3 times by earnings. That is cautious considering the first half outcome. A total dividend of 6p/share is forecast for next year.
There is still plenty of growth in profit to come and the dividend will grow. Panmure Liberum believes that pre-tax profit could reach £7 million in 2027-28 and the dividend could be 7p/share. This is based on relatively modest expectations for the economy. Growth in the dividend will turn a relatively low yield into a much higher one. Buy.
Andrew Hore is a freelance contributor and not a direct employee of interactive investor.
AIM stocks tend to be volatile high-risk/high-reward investments and are intended for people with an appropriate degree of equity trading knowledge and experience.
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