Spring Budget 2023: investing in commercial property through your self-invested personal pension (SIPP)

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Emily Sutherland - Senior Associate

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What is a SIPP

What is a SIPP?

A SIPP is a self-invested personal pension scheme where the policyholder/ member has the flexibility and control over investment decisions and strategy. The money contributed to your SIPP can go into a wide range of investments in many different assets, particularly buying commercial property. This is attractive to investors as rent is paid into your pension fund instead of to a landlord.

To invest in commercial property using a SIPP, you can either directly buy a property, transfer the title of a property you already own into your SIPP or pool your money with multiple other investors to buy commercial property through a property fund.

A SIPP provides greater freedom for members to invest in a range of permitted investments:

  • Cash deposits;
  • Listed shares on a recognised UK or overseas exchange;
  • Unit trusts;
  • Government securities;
  • Investment-grade gold bullion, and
  • Commercial property.

The Tax Advantages of Buying Commercial Property Through a SIPP

  • The income acquired from property held under the pension scheme is exempt from income tax;
  • If a gain arises on the disposal of the commercial property, the capital growth in the property will belong to the pension itself rather than an individual and will not attract capital gains tax;
  • The commercial property owned by the SIPP will not form part of your estate for inheritance tax purposes, and
  • Investing in property through a SIPP allows you to leave money in your pension for your family to inherit after your death, and they may be able to draw a tax free income from this.

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The tax advantages of buying commerical property through a sipp

The Changes to Pension Schemes Following the Spring Budget 2023

Following the announcements in the Spring Budget on 15th March 2023, there have been some significant changes to the pension rules.

Chancellor Jeremy Hunt has announced that the current lifetime allowance, i.e., the maximum amount of pension benefits that can be held in a pension scheme over a person’s lifetime, is due to be abolished within the 2024-2025 tax year. This means that the value of funds that a person can accumulate in pension benefits over their lifetime is uncapped.

Although this legislative change has not yet come into force, from 6th April 2023, no tax will be charged (lifetime allowance charge) on any pension benefits that exceed the lifetime allowance, which is currently set at £1,073,100.00.

Further to this, the amount that people can pay into their pension each year, the annual allowance, has been extended from £40,000 to £60,000.

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The Changes to Pension Schemes Following the Spring Budget 2023

What Does This Mean for Investors?

Investing in property yields significant capital growth and long-term returns, which is attractive to investors. The potential lifting of the lifetime allowance is an opportunity to invest in commercial property through a SIPP, as it is an efficient way of adding money to your pension, through the accumulation of surplus rent, without having to pay additional tax.

Investors may now be able to save an unlimited amount of money in their pension pot, taking advantage of the full tax benefits of a SIPP without breaching the lifetime allowance limit and incurring tax charges. The extension of the annual allowance enables individuals to contribute more to their SIPP each year, which increases the buying power of investors.

If you wish to make an investment, whether that be buying commercial property through a SIPP, it is advised that you seek independent financial advice before doing so.

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What does this mean for investors

Contact Our Commercial Property Team

If you would like assistance in the sale or purchase of commercial property through a SIPP, please get in touch with our team of experienced Commercial Property solicitors today on:

0161 941 4000


Emily Sutherland's profile picture

Emily Sutherland

Senior Associate

Emily has 7 years of experience acting as a Commercial Property solicitor. Emily has specialist expertise in real estate commercial matters, including landlord and tenant work, acquisitions and disposals, property development and finance.

About Emily Sutherland >