pension

Using Pensions to Buy Property: What UK Investors Need to Know

Investment Strategies
August 06, 2025•3 min read

Investing in property through a Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS) has become an increasingly popular strategy for UK property investors—especially business owners. Offering tax advantages, flexible structures, and long-term growth potential, these pensions enable you to invest in commercial property in a structured and efficient way. But it comes with rules and considerations.

Here’s everything you need to know.

💼 What Are SIPPs and SSASs?

  • SIPP (Self-Invested Personal Pension): A personal pension allowing individuals to invest in a wide range of assets, including commercial property. SIPPs offer tax-free growth and relief on contributions (techzone.aberdeenadviser.com, Nelsons).

  • SSAS (Small Self-Administered Scheme): A trust-based pension typically set up by business owners. Offers more control, including the ability to lend funds back to your business—generally up to 50% of the fund’s net value (Wikipedia).

✅ What You Can—and Cannot—Buy

  • Only commercial property is permitted, such as offices, warehouses, retail units, or mixed-use (if non-residential parts of the property serve the business) (Chapter 3 Financial Planning).

  • Residential property purchases are heavily penalised—often taxed at 55–70% if used by the pension, even if indirectly, so must be avoided (rangewell.com).

💷 Tax & Financial Benefits

  • Rental income received by the pension is tax-free, and capital gains arising on property disposal are exempt from CGT (ftadviser.com).

  • Use business rent payments as a deductible expense, reducing corporation tax for the tenant company (Chapter 3 Financial Planning).

  • Borrowing is permitted (up to 50% of the scheme's net assets), allowing finance for more expensive property deals (rangewell.com).

⚠️ Key Restrictions & Considerations

  • Liquidity risk: Property is illiquid. If it's the only pension asset, you may struggle to generate income at retirement (Westerby The Pension Specialist).

  • Valuation & diversification: Lenders typically cap borrowing relative to fund value. Lack of diversification can increase risk (Boolers).

  • Professional operations: SIPPs may restrict independent property management; schemes often require professional third-party managers for VAT and compliance reasons (InvestAcc Pension Administration).

  • Transactional rules: Buying knowingly from a connected party must occur at market rate to avoid tax charges (ftadviser.com).

⚖️ SIPP vs. SSAS: Which Is Better?

Feature SIPP SSAS

Control over assets Lower Higher

Permitted to loan to business No Yes, up to 50%

Ideal for syndicate investments Limited Yes

Complexity Simpler Higher

(Wikipedia, rise-capital.uk)

SSAS is often preferred for business owners seeking internal financing flexibility, joint ventures, or more control. SIPP is simpler and suitable for individuals without business debt considerations.

📝 Practical Investor Steps

  1. Consult your SIPP/SSAS provider early—ensure both the scheme and property fit HMRC rules (Nelsons).

  2. Avoid residential assets unless strictly compliant (e.g. caretaker flat)—risk of punitive tax charges is high (Steele Raymond LLP).

  3. Maintain professional documentation for leases, valuations, and trusteeship trust agreements (ashfords.co.uk, atsipp, InvestAcc Pension Administration).

  4. Work with advisors experienced in pensions and commercial property to manage scheme compliance, funding, and reporting.

🚀 Is This Right for You?

Using SIPPs or SSASs to invest in commercial property can provide long-term pension growth, tax efficiency, and even let you rent to your own business. However, missteps could jeopardise both pensions and retirement plans. Always seek tailored advice.

At SHPC Limited, we partner with seasoned pension advisers and legal professionals to support investors exploring these strategies—whether for supported living assets or commercial investment.

Get in touch with us!

📩 [email protected]
📞 0118 989 9783
📱 Shannon Hoang: 079 4002 0670
🌐 www.shpropertyconsultancy.co.uk

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