Borrowing Against Assets vs Selling — Which Makes Sense?

The Dilemma Facing Asset-Rich Individuals

When you need cash and your wealth is locked in assets, two fundamental options present themselves: sell something, or borrow against it. Both will put money in your hands. But the long-term consequences of each decision can be radically different — affecting your tax position, your net worth trajectory, and your relationship with assets that may carry significant personal meaning.

This is not an abstract financial planning question. It surfaces in very real situations: a £400,000 inheritance tax bill that must be paid within six months; a business that needs a £250,000 cash injection to survive a difficult quarter; a divorce settlement that requires one spouse to release equity from the family home. In each case, the choice between selling and borrowing deserves careful thought.

When Selling Makes Sense

Selling is often presented as the default option, and in certain circumstances it genuinely is the right one. Consider selling when:

• The asset is declining in value. If you hold a property in a falling market or shares in a company with deteriorating fundamentals, selling now may be better than selling later. Borrowing against a depreciating asset means you could end up owing more than the asset is worth.
• You have no emotional attachment. If the asset is purely financial — a second investment property, a parcel of listed shares — and you have no particular reason to retain it, selling provides clean, permanent liquidity with no ongoing interest costs.
• Crystallising a capital gains tax loss is useful. If the asset is worth less than you paid for it, selling now creates a capital loss that can offset gains elsewhere in your portfolio. This is a legitimate and often overlooked tax planning tool.
• You want to simplify your affairs. Fewer assets mean less administration, lower insurance costs, and simpler estate planning. Sometimes the smartest financial move is also the simplest.

When Borrowing Makes Sense

Borrowing against assets is almost always worth considering when one or more of the following conditions apply:

• The cash need is temporary. If you need money now but expect income, a property sale, or another liquidity event in the next 6 to 24 months, borrowing bridges the gap without permanently reducing your asset base. You borrow, meet the obligation, and repay when funds arrive.
• The asset is appreciating. If your property or investment portfolio is growing at a rate that exceeds the cost of borrowing, selling destroys future value. The mathematics are straightforward: if an asset grows at 8% per year and borrowing costs 5%, you are 3% better off by keeping the asset and borrowing against it.
• You want to avoid a tax event. Selling an asset is a disposal for capital gains tax purposes. Borrowing against it is not. For an individual sitting on large unrealised gains, the CGT saving from borrowing rather than selling can be tens of thousands of pounds.
• The asset has emotional or heritage value. A family home, a collection built over decades, farmland that has been in the family for generations — these cannot simply be repurchased later. Borrowing allows you to access their value while preserving them.
• You need to meet a tax payment deadline. HMRC imposes strict deadlines and penalties for late payment. Borrowing against assets can provide funds within days, whereas selling property or other illiquid assets can take weeks or months.

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Comparison of Key Factors

Real-World Scenarios

To make this concrete, consider three situations we see regularly:

Scenario 1: An IHT Bill Due in Six Months

After a parent's death, the estate owes £320,000 in inheritance tax. The estate comprises a family home worth £1.2 million and an investment portfolio worth £600,000. Selling the home would take months and might not complete before the deadline. Selling shares would crystallise £80,000 in capital gains. Instead, borrowing £320,000 against the property at 5.5% gives the executors time to administer the estate properly, sell the home at the right price, and repay the loan — saving over £16,000 in CGT that would have been triggered by a forced share sale.

Scenario 2: A Business Cash Flow Gap

A business owner needs £150,000 to cover a three-month gap between a major contract payment and current operating costs. She owns a £2 million property portfolio outright. Selling a property would take 3-6 months, trigger substantial CGT, and permanently reduce her rental income. A six-month loan secured against one property costs approximately £4,000 in interest — a fraction of the tax and opportunity cost of selling. The contract pays, the loan is repaid, and the portfolio remains intact.

Scenario 3: A Divorce Settlement

A divorce court orders one spouse to pay the other £500,000 within 90 days. His wealth is concentrated in a private company and a fine art collection. Selling the art at auction would take months and might achieve below-market prices under time pressure. A loan secured against the collection provides the settlement funds immediately, giving him time to arrange a structured sale later or refinance against other assets.

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The Hybrid Approach

In practice, the answer is rarely purely “sell everything” or “borrow against everything.” The most effective approach usually combines both strategies:

• Sell underperforming or unwanted assets — those in declining markets, generating poor returns, or no longer aligned with your goals.
• Borrow against appreciating or irreplaceable assets — those with strong growth potential, emotional significance, or where a sale would trigger a disproportionate tax charge.
• Use the proceeds from sales to reduce the amount you need to borrow — keeping interest costs manageable and loan-to-value ratios conservative.

The key is to approach the decision analytically rather than emotionally. Every asset in your portfolio should be evaluated on its merits: what is the cost of selling it versus borrowing against it? A qualified advisor can model both scenarios and help you find the optimal blend.