Where to Invest an Inheritance: Property vs NISA?

inheritance property nisa

Where Should You Invest an Inheritance: Property vs NISA?

If you receive an inheritance it makes to invest it for your future. But with so many options, where should you put your money? In this article, we’ll look at the differences between investing in property vs investing in a New ISA (NISA).

How Easily Can You Turn Your Investment into Cash?

Whilst investments should be part of your long-term financial plan, it’s important to know how easily you can access your money.

When you invest in property you have to sell it to get your investment back. It’s hard to only take some money out. As the saying goes, “You can’t pull out a brick to buy a loaf of bread.”

The difference with a Stocks and Shares NISA is that you can easily sell some or all of your investment to release cash. An investment in the stock market is more liquid than one in property.

The Ongoing Cost of Your Investment

You have to consider the costs of where you choose to invest.

With property, you’ll have tenants to manage and maintenance costs for your property. In addition, there are fees to buy and sell the property. You’re also running a business when you invest in buy-to-let and you have legal obligations too.

With a NISA, there are running costs for the funds and the platform/provider you use. However, unlike with property investment, you won’t have tenants to manage.

Consider the Tax Implications

Another cost to consider with your investment is the tax you may have to pay.

NISAs are tax-free investments for life, regardless of where you invest. In contrast, if your property investment increases in value, you’ll have to pay capital gains tax when you sell. This can be up to 28% for higher or additional rate taxpayers on residential properties.

Weigh Up the Risk You’re Taking

Risk is a key factor in investing. It’s the uncertainty about what may happen in the future.

Investing in property alone concentrates your risk entirely in this one sector. As a result, if the value of property falls you won’t have investments in other sectors to offset this.

With a Stocks and Shares NISA you can spread the risk across different assets. These can be shares and bonds as well as funds. With a diverse investment across different sectors you can reduce your risk.

How to Make Your Investment Choice

To make your investment choice, you have to weigh up the costs, risks, flexibility and tax implications between property and a Stocks and Share NISA.

Take advice from a professional if you need help making your investment choice.

Please Note: The value of the investment can go down as well as up and you may not get back as much as you put in.

If you would like to speak to us about advice on investments or financial planning please email us [email protected].

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