{"id":1282,"date":"2023-11-24T07:50:51","date_gmt":"2023-11-24T07:50:51","guid":{"rendered":"https:\/\/www.redstarwealth.co.uk\/blog\/?p=1282"},"modified":"2023-11-24T07:50:51","modified_gmt":"2023-11-24T07:50:51","slug":"using-your-pension-for-commercial-property","status":"publish","type":"post","link":"https:\/\/www.redstarwealth.co.uk\/blog\/using-your-pension-for-commercial-property\/","title":{"rendered":"Using Your Pension for Commercial Property"},"content":{"rendered":"

If you\u2019re considering investing your pension into property, it’s important to know what\u2019s what.<\/p>\n

Which Pensions can be used for Property Purchase?<\/h2>\n

Self-administered pension schemes can be used for the purchase of property, of which there are two types:<\/p>\n

    \n
  1. SIPPs (self-administered pension schemes)- used by individuals<\/li>\n
  2. SSASs (small self-administered schemes)- used by companies<\/li>\n<\/ol>\n

    If the pension fund does not have enough money to buy the property outright, it can borrow money to make the purchase of up to 50% of the value of the property.<\/p>\n

    Commercial NOT Residential<\/h2>\n

    It can be very tax efficient to buy commercial property through a pension fund, for reasons we will discuss in a moment. The types of buildings that qualify as commercial property are things like warehouses, offices, retail units, etc.<\/p>\n

    It\u2019s important to note here that buy-to-let properties are classed as residential, not commercial<\/strong>, even if you aren\u2019t using them for your own<\/em> residential use.<\/p>\n

    You can buy residential property with your pension fund, but you will face a large tax bill from HMRC, which in most cases, makes it financially unviable. It cannot be brought into a pension scheme in a tax-efficient way.<\/p>\n

    Why is it Tax Efficient?<\/h2>\n

    When you use your pension fund to purchase commercial property, the property in question is now owned by your pension.<\/p>\n

    Let\u2019s imagine a scenario in which you are a business owner who uses your pension scheme to purchase the premises of your business to take advantage of tax breaks. Your business then takes up a commercial lease with your pension, paying rental payments based on standard market rates. When your business makes these rental payments, the money goes straight into your pension rather than a landlord. This rental income received from the pension fund in regard to the property is exempt from income tax.<\/p>\n

    If you then sell this property in the future, any gains made on the disposal of the property by the pension scheme are free from capital gains tax.<\/p>\n

    As well as these significant tax benefits, investing your pension in commercial property means a regular income into your pension pot. It also means you own a physical asset which won\u2019t disappear if the market crashes and shouldn\u2019t fluctuate in value too much.<\/p>\n

    However, there is no guarantee that the property you invest in will appreciate in value. If it does depreciate and the property makes a loss at the point of sale, your pension is also making a loss. Additionally, you should bear in mind that even if it does make a profit, you cannot access pension funds until age 55, so this money will remain locked away in your pension until then.<\/p>\n

    If you are considering investing your pension into property, you should contact a regulated and qualified financial adviser before making any big decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"

    If you\u2019re considering investing your pension into property, it’s important to know what\u2019s what. Which Pensions can be used for Property Purchase? Self-administered pension schemes can be used for the purchase of property, of which there are two types: SIPPs (self-administered pension schemes)- used by individuals SSASs (small self-administered schemes)- used by companies If the […]<\/p>\n","protected":false},"author":7,"featured_media":1284,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"spay_email":"","footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false},"categories":[1],"tags":[108,932,168,152,931,902,153,483,933,930,928,929,926,927],"yoast_head":"\nUsing Your Pension for Commercial Property - Red Star Wealth<\/title>\n<meta name=\"description\" content=\"We discuss which pensions can be used for property purchase, what kind of property you can purchase, and the tax benefits that come with it\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.redstarwealth.co.uk\/blog\/using-your-pension-for-commercial-property\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Using Your Pension for Commercial Property - 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