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How do I invest in property through my company or pension?

There are several routes available to limited company directors who wish to invest in property, each with different tax treatment and rules. The main options include purchasing commercial property through a SSAS pension, using SSAS loanback facilities to fund property purchases, investing through a Family Investment Company (FIC), or purchasing property directly through your trading company. Each route has distinct implications for Corporation Tax, Capital Gains Tax, and Inheritance Tax.

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How to invest in property through your company or pension: a comprehensive guide for UK limited company directors

Understanding your options as a UK limited company director

  • Understand holding property in a pension versus in a company
  • How the SSAS and FIC can facilitate tax-efficient property investment
  • Understand how the SSAS loanback can be used to fund property acquisition

If you are a UK limited company director with surplus company cash or existing pensions, you have several options for investing in property in a tax-efficient manner.

Below you will find detailed information on each route. Understanding the differences between holding property in a pension versus a company is essential for making informed decisions. A SSAS can also be combined with other structures, such as a Family Investment Company, to achieve even greater tax efficiency and wealth protection for your family.

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Tax Relief on Contributions

Contributions to a SSAS receive tax relief subject to HMRC limits and conditions. This makes it a powerful tool for reducing Corporation Tax whilst building retirement wealth and funding property investment.

Are you considering how to invest surplus company profits or consolidate existing pensions?

A Small Self-Administered Scheme is a type of corporate pension scheme that can be established by a limited company. It operates on a defined contribution basis and is designed for company directors and key employees.

The SSAS is run for the benefit of the business owner, other company directors, key employees, and family members. It offers extensive control and flexibility compared to traditional pension arrangements. We are often asked what the benefits of a SSAS pension are, and the answer is significant.

As well as the tax relief available on contributions, a SSAS provides much greater investment choice and control. This includes the ability to invest in commercial property, make loans back to the sponsoring company, and align your pension strategy with your wider business and wealth planning objectives.

n Commercial Property

A SSAS pension can hold commercial property free from Corporation Tax, Capital Gains Tax, and Income Tax on rental income. This makes it one of the most tax-efficient structures for property investment available to UK company directors.

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n Family Investment Company

A Family Investment Company offers an alternative route for holding property investments outside a pension. It provides Inheritance Tax protection whilst maintaining control and flexibility over how assets are managed and distributed to future generations.

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Why consider a Small Self-Administered Scheme for property investment and tax planning?

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Tax-Exempt Property Investment

A SSAS pension is exempt from Corporation Tax, Capital Gains Tax, and Income Tax on rental income. This makes it one of the most tax-efficient structures for holding commercial property available to UK company directors.

A SSAS is a tax-efficient structure for property investment because it is exempt from Corporation Tax, Capital Gains Tax, and Income Tax on rental income. Contributions to the SSAS also receive tax relief, subject to HMRC limits and conditions. On this page, we will explain what a SSAS is and how to determine whether it is the right option for your circumstances.

The first question we are often asked is why should I have a SSAS. A SSAS, when properly managed, is a highly tax-efficient retirement and investment vehicle. In the past, SSAS pensions were established by directors of limited companies for the benefit of employees. Since pension simplification, partnerships and families have also been permitted to establish a SSAS. A small number of family members may also join an existing SSAS.

Members of a SSAS have significantly more control over investment decisions than is typical for pension schemes. This allows for strategic investment in commercial property and other assets that align with your business objectives.

What makes the SSAS loanback facility an attractive option?

One of the most attractive features for many directors is the ability to take out a loan from the SSAS which can be used to fund business growth or property acquisition. However, there are strict rules governing how these loans must be structured. These pension loan rules are set by HMRC.

  • The maximum loan term is five years
  • Interest charged on the loan must be at least 1% above the average base lending rate
  • The loan must be secured as a first charge against an asset (or assets) of at least equal value to the loan, plus the loan interest
  • The loan cannot be more than 50% of the net value of the scheme assets
  • Repayment of the loan must be made in equal annual instalments

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FAQs

Can a SSAS purchase commercial property?

Yes. A privilege of a SSAS pension is that it can invest in commercial property. Read more…

Can a SSAS purchase residential property?

A SSAS cannot invest in or hold residential property.

What is the difference between a trading company and an investment company?

The difference between a trading company and an investment company is fairly straightforward in the eyes of HMRC. A trading company must not use its surplus cash for investment purposes whereas the business of a trading company consists of income made, mostly in making investments. To determine whether your company is a trading company or an investment company, you can apply a series of 20% tests. The tests determine whether the cash held within your company represents more than 20% of the balance sheet, or more than 20% of the turnover or even the profit. HMRC have been known to win first tier tax tribunals as a result of the directors investing more than 20% of their time managing investments. An example of this could be where a director has a share dealing account and spends much of their time managing this rather than focussing on the trade of the company. You can read more in our guide

What can a Lifetime Business Tax Plan invest in?

A Lifetime Business Tax plan can invest in a wide variety of asset classes, including:

And much, much more

How can I invest my SSAS pension money?

SSAS pension funds can be invested in many ways. The SSAS can invest in everything that traditional pensions can, with the same tax benefits, plus much more. For example, invest in property or loan to your business.

TLPI take the time to understand your situation, strategies and goals. We then support you by providing the knowledge and tools to ensure your longer term SSAS strategies are working to grow your SSAS, support your business and achieve the retirement you desire. We are able to offer expert pension, property investment, tax and investment strategy advice and support. To book a call at a time to suit you, please Click here.

What are the rules for a SSAS loanback?

HMRC requires that a SSAS loanback meets five conditions: the loan must not exceed 50% of the fund value; the term must be no longer than 5 years; interest must be at least 1% above the average base lending rate; the loan must be secured by a first legal charge over assets of equal value; and repayment must be made in equal annual instalments of capital and interest.

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