What are the benefits of buying property through a pension scheme?


  • No tax on the rents
  • No tax on the growth in value of the property
  • No inheritance tax on the death of the beneficiary
  • The pension can be left to the family members on the death of the beneficiaries
  • Due to the tax free environment there is more capital to invest, creating growing returns

This planning has become less popular in recent times due to the life time limit of £1,073,100. If the value of the pension scheme exceeds this limit, then there is a significant tax charge on the excess when the pension was paid. Plus the maximum amount that could be paid into the pension scheme as a contribution was £40,000. These factors restrict the size of the pension scheme and block them from buying substantial commercial property.

In the Spring Budget, the Chancellor removed the life time limit on pension pots, allowing for growth without restriction (excluding the tax free lump sum). The Chancellor also increased the maximum amount that can be contributed to a pension scheme each year from £40,000 to £60,000. These changes may bring back this popular planning for commercial properties. Whilst the pension contribution is limited, within 3 years a husband and wife could have pension contributions available to invest in excess of £360,000 (ignoring any past pensions), and after borrowing £180,000, they could buy a commercial property worth over £500,000.

We will have to wait and see if the planning increases now the limits have changed.

The next step

Pensions buying commercial property is complex and tax advice should be taken beforehand, please contact Clive Gawthorpe, or your usual UHY adviser. 

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