Property Pensions: The Tax-Efficient Method of Investing in Property
Abroad and in the UK
UK pensions legislation now allows for commercial property to be held
within a Self Invested Personal Pension - (SIPP).
Who is eligible?
Anyone is eligible if you have earnings or can transfer funds from
existing pension arrangements. (Please take independent financial
advice).
How do I purchase a property?
- You may use existing funds which may be currently tied up until
you retire
- Mortgage of up to 50% of your pension fund
- Company and/or individual pension contributions
What is an example of an overase commercial property
Click
here to view a property available to purchase through a SIPP
Annual contributions can be up to:
- 100% of your earnings or, if self employed, up to £215,000
tax free
- £215,000 company contributions regardless of earnings, if
employed, per member.
For example, a husband and wife if directors of their own limited
company, can each contribute £215,000 tax free
What are the benefits of using a SIPP?
- Any rental income generated is free of UK income tax, paid gross
- The fund grows free of UK tax
- No UK capital gains tax is applied on the disposal of a property
- Outside of estate – free of inheritance tax
- Contributions into the plan qualify for corporation tax relief or personal tax relief at marginal rate – i.e. – Up to 40%
How can I benefit from personal tax relief if a lump sum is invested?
You may invest, subject to maximum funding, and receive tax relief.
For example:
22% tax reduction (40% if you are a higher rate taxpayer) when purchasing
an overseas property for their fund: that means that a property costing
£105,000 can be purchased for as little as £63,000
Do I pay stamp duty and local taxes using the SIPP?
Yes, you do. It is the same as if you had bought it personally, but
it is paid out of your pension fund along with other associated costs
such as professional fees and maintenance.
Are there any legal restrictions as to location?
Overseas as well as UK commercial property can be purchased via a
SIPP.
Who will own the property in the SIPP?
It is owned by the trustees – who hold it for your benefit – but you remain the beneficial owner(s) under the rules of the SIPP.
Can I club together to purchase property with other parties?
Yes (see previous comment about contributions). This is called Syndication.
You can, for example, purchase property in conjunction with a spouse
or partner; friends or family, or unconnected parties. A family SIPP
has no minimum age restrictions, can include family and/or friends,
and in many cases will form an essential part of Inheritance Tax planning
for UK and worldwide assets.
Is it possible to form a syndicate to buy property of higher value – or more than one property?
Yes, you can club together, and it is possible to borrow up to 50% of each individual fund as well.
Negatives
- A SIPP is a pension, and so you cannot draw benefits under current rules until you are 50 – and it is not a liquid asset
- Personal use could create an income tax liability, unless you pay a market rent to your SIPP
- You cannot trade properties
How do we pull this all together?
Escapes2.com have created a network of specialist advisors covering:
- Independent financial advice
- Legal advice
- Tax advice
- Mortgage advice
- Property Finding’ to source ‘first phase’ ‘off-plan’
investment properties
What do I do now?
- In the first instance we will put you in contact with one of our strategic
IFA partners who will asses both your personal suitability and/or
existing pension plan suitability. Our partners will offer you an
independent appraisal of your circumstances. Email us now pensions@escapes2.com
They can further assist you in:
- Setting up your SIPP or syndicate group property purchase
- Arranging pension transfers where suitable (which can take up to 6 months)
- Arranging pension contributions
Do you want to enquire about a property for sale in France?
