Property SIPP: The Tax-Efficient Method of Investing in Property in the UK & Abroad
What is a SIPP?
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A Self Invested Personal Pension (SIPP) is a scheme designed to give you greater
control over how your pension fund is invested. Currently, you can choose from
a wide range of investment options, including shares, government and corporate
bonds, unit and investment trusts and commercial land and property. This allows
you to spread your risk and be more in control of how your future finances.
Who is eligible?
Anyone who is either currently earning or who can transfer funds from an
existing pension arrangement is eligible. An independent financial advisor will
be able to accurately assess your situation and tell you whether a SIPP is
right for you.
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How do I purchase a property?
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Use existing funds which at the moment may be tied up until you retire
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Mortgage of up to 50% of pension fund
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Company and/or individual pension contributions
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AVC's
Annual contributions can be up to:
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100% of earnings, if self employed, up to £215,000 tax free
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£215,000 company contributions regardless of earnings, if employed, per member.
For example, husband and wife, if directors of own Ltd company, can contribute
£215,000 tax free each.
What are the benefits of using a SIPP?
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Rental income free of UK income tax - paid gross
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Fund grows free of UK tax
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No UK capital gains on disposal of property
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Outside of estate - free of inheritance tax
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Contributions into 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:
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22% tax reduction (40% if you are higher rate taxpayer) when purchasing an
overseas property for your 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, 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.
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 buy property with others?
Yes - see previous comment about contributions. This is called Syndication, so
for example with:
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Spouse
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Partners
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Friends
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Family
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Unconnected parties
The Family SIPP?
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No minimum age restrictions
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Can include family and/or circle of friends
In many cases this will form an essential part of IHT 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
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It is a pension and you cannot draw benefits until you are 50 under current
rules and it is not a liquid asset
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Personal use could create an income tax liability unless you pay a market rent
to your SIPP
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You cannot "trade" properties
How do we pull all this together?
Understanding the new legislation to take full advantage of this exciting
opportunity is no simple task. So we have created a network of specialist
advisers covering:
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Independent Financial Advice
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Legal advice
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Tax advice
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Mortgage advice
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Property Finding to source first phase "off plan" investment properties
What Do I do now?
In the first instance,
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Take independent financial advice we have access to independent advisors who will offer you a FREE independent appraisal of your circumstances.
He will further assist you in:
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setting up your SIPP or Syndicate Group Property Purchase
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Arrange Pension transfers where suitable(can take up to 6 months)
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Arrange Pension contributions
e-mail
propertysales@escapes2.com