Objectives: Neuropsychiatric symptoms are related to disease progression and cognitive decline over time in cerebral small vessel disease (SVD) but their significance is poorly understood in covert SVD. We investigated neuropsychiatric symptoms and their relationships between cognitive and functional abilities in subjects with varying degrees of white matter hyperintensities (WMH), but without clinical diagnosis of stroke, dementia or significant disability. Methods: The Helsinki Small Vessel Disease Study consisted of 152 subjects, who underwent brain magnetic resonance imaging (MRI) and comprehensive neuropsychological evaluation of global cognition, processing speed, executive functions, and memory. Neuropsychiatric symptoms were evaluated with the Neuropsychiatric Inventory Questionnaire (NPI-Q, n = 134) and functional abilities with the Amsterdam Instrumental Activities of Daily Living questionnaire (A-IADL, n = 132), both filled in by a close informant. Results: NPI-Q total score correlated significantly with WMH volume (r (s) = 0.20, p = 0.019) and inversely with A-IADL score (r (s) = -0.41, p < 0.001). In total, 38% of the subjects had one or more informant-evaluated neuropsychiatric symptom. Linear regressions adjusted for age, sex, and education revealed no direct associations between neuropsychiatric symptoms and cognitive performance. However, there were significant synergistic interactions between neuropsychiatric symptoms and WMH volume on cognitive outcomes. Neuropsychiatric symptoms were also associated with A-IADL score irrespective of WMH volume. Conclusions: Neuropsychiatric symptoms are associated with an accelerated relationship between WMH and cognitive impairment. Furthermore, the presence of neuropsychiatric symptoms is related to worse functional abilities. Neuropsychiatric symptoms should be routinely assessed in covert SVD as they are related to worse cognitive and functional outcomes.