March 18th, 2018

Can I use my pension to buy a property?

Accountancy for landlords

 

Putting a property into a pension scheme can be a brilliant way to save tax.

Once the property is in a pension scheme:

– all future capital gains are tax free
– the rent earned by the property is tax free
– there can be inheritance tax benefits

Here’s some FAQ’s

What sort of property can a pension hold?

At present you can only invest in commercial property – shops, offices, warehouses etc. You can’t invest in residential property.

What sort of pension do I need?

Typically you’d do this through a SIPP or a SSAS. You can transfer existing pensions into a new pension that can buy a property.

Can the pension scheme borrow money?

Yes. The pension can borrow 50% of the assets held before borrowing. So a fund of £100,000 could borrow £50,000 and buy a property of £150,000.

Can I jointly own a property with my pension scheme?

Yes – although it would be essential to get the legals right.

This is a good way of buying a property that the pension scheme can’t currently afford on its own.

For example, a fund with £50k could borrow £25k to contribute £75k. An individual might be able to put in a deposit of £15,000 and borrow £60,000 contribute another £75k.

Can the pension buy a property I already own?

Yes – but it needs to be at a realistic price. You would also need to consider other taxes like Capital Gains Tax and Stamp Duty.

Can my company rent the property from my pension?

Yes – again that needs to be at a fair value. This is a great plan as your company will get tax relief on the contribution while your pension gets the rent tax free.

Disclaimer – this blog is to give you some ideas to think about. It is not advice. Pensions are complicated, investments are risky, transferring pension schemes is risky. Before undertaking any of the steps above you’d need professional advice from a suitably experienced IFA and an accountant.

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Accountants Newsletter Pensions Tax Advice

by
Managing Director

Jonathan trained as a chartered accountant with Price Waterhouse (now PWC) in Liverpool before becoming a small business services manager for Grant Thornton in Warrington. He also spent three years as the financial controller for Brookside and Hollyoaks (not that he ever mentions it!).

Jonathan is recognised as a specialist in the entertainment industry and is often called upon to provide training courses and seminars for media professionals. He's also a bit of a technology geek and has been recognised with the accountancy industry as one of the most progressive accountants in the UK.
Outside of work Jonathan is very proud to be the Treasurer of the Tim Parry Johnathan Ball Foundation for Peace and to be on the Council of the Liverpool Institute of Performing Arts (LIPA)

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