Property Under Wraps

Martin Vincent - Associate Partner St. James's Place Group

17 December 2015

Owning your business premises could help you build a bigger pension fund.

Indisputably, pensions have a powerful tax advantage, but if you’re a director or owner of a small business, the company’s assets could help you generate a bigger pension fund faster.

The boost is achieved by holding your business premises within a pension wrapper. Once those premises (including any commercial or agricultural land) are ‘owned’ by the pension, they can be leased back to the business and, significantly, rent paid by the business can go directly into your pension pot.

The tax breaks mean that business owners can build their retirement nest eggs quicker, especially if tax-relievable contributions are made from income.

Building on success

The commercial property market has been performing well over the past few years, owing to improving economic conditions and low interest rates.

Of course, good performance shouldn’t be seen as a guide to the future, since there will be years when property falls in value.

Putting capital gains to one side, however, it may be that the decision to move property into a pension wrapper is validated by the combination of tax benefits and new pension freedoms; these include the availability of uncapped income from age 55 and the possibility of mitigating death taxes altogether.

Safety warning

Only a self-invested personal pension (SIPP) and a small self-administered scheme (SSAS) can hold commercial property. Many business owners will not have sufficient funds to purchase their premises outright, so they can face the challenge of borrowing money to acquire the property. The rules allow investors to borrow up to 50% of the value of their pension pot to fund the purchase.

Once everything is established, there’s also the task of making sure that rental income is invested appropriately.

Remember also that property tends to be illiquid when compared to other investments. It could take months, or even years, to sell the premises at the right price – the market might be down at just the moment you want to sell.

These are just some of the reasons that directors and owners of small businesses should seek advice from a specialist before taking action.

Height restriction

One increasing challenge is the introduction of a reduced lifetime allowance of £1 million in April 2016.

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Martin Vincent on 07725 971543 or email

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Share this

Gold Patrons & Strategic Partners