Quite often, people come into possession of a thing, and it doesn’t initially occur to them that they don’t have to keep the thing.
If someone inherits a house worth £500,000, say, their initial reaction is very often that they’ll rent it out. If they’d inherited £500,000 cash, would they have bought a house just like that one to rent out? Not in a million years! So, logically they should just sell the house (there’ll be no tax to pay if they sell it as soon as they get it) and use the £500,000 cash to do whatever is better for them.
If someone on PAYE gets £150,000 a year of net pay and £100,000 of shares in their listed employer, normally their instinct is to hang on to the shares. But if their net pay was £250,000 a year cash, would they use £100,000 of it to buy shares in a single company, upon which their own income is also reliant? Not in a million years! They should probably sell some or all of the shares (again, tax-free if they do it right away).
When events like this happen, take a step back and think about what you’d do with cash. Because you could actually do that.
Comments