Changes to pensions are fast approaching, but for business owners using their pension to hold commercial property, the reasons for doing so remain compelling.
From April 2027, most unused pension funds and pension death benefits will be brought into the scope of inheritance tax (IHT). It’s a significant change, but one that doesn’t remove the underlying tax advantages of holding commercial property in a registered pension scheme.
Using a SIPP or SSAS to invest in commercial property
A Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS) gives individuals and business owners a strong degree of control over their pension investments, offering a tax-efficient way to buy commercial property.
The property can then be leased to the member’s business or to a third-party tenant. Rental income received and investment gains made within the scheme are generally exempt from income tax and capital gains tax and, for a double tax benefit, where the investor’s trading company is tenant, the rent will generally be an allowable business expense for corporation tax purposes.
Investors don’t necessarily need to hold the full purchase price in their pension before they start, with options to borrow up to 50 per cent of the net value of the fund being available, subject to applicable rules.
Why commercial property remains attractive to pension investors
Market commentary indicates year-on-year growth in the number of SIPP and SSAS transactions taking place and at Aberdein Considine LLP we are seeing significantly more interest in this type of transaction, both from business owners and from individual investors.
Acquiring a property through a pension allows rent to be paid into a pension structure, rather than to an external investor
— Gemma Perfect
If a business sale is on the horizon, separating the trading business from the property can potentially leave the owner with two assets: the value realised from selling the trading business and a retained investment property, along with the future rental income it generates within the pension.
It can also be equally attractive for businesses that currently lease their premises from a third-party landlord.
Acquiring a suitable property through the owner’s pension allows rent to be paid into a pension structure, rather than to an external investor, benefiting the owner’s long-term retirement planning, while freeing up capital within the business that can be used to support expansion, investment or debt-reduction.
What the 2027 inheritance tax changes could mean
Whether this type of structure is, or remains, the best option for an individual in light of forthcoming IHT changes will depend on their objectives, their plans for their business and how they intend to use or pass on their pension assets.
Having first taken specialist wealth and tax advice to determine whether this route is right for the individual or business, those looking to pursue this type of investment should seek advice from a commercial real estate solicitor with experience in SIPP and SSAS transactions who can help ensure that the acquisition is structured appropriately and runs smoothly through to completion.
The sooner advice is sought, the more options are left on the table, particularly with April 2027’s proposed IHT changes hoving into view.
Gemma Perfect is a Legal 500-recognised Leading Partner in Commercial Real Estate at Aberdein Considine LLP
To find out more about commercial real estate advice, visit https://legal.acandco.com/services/for-businesses-and-organisations/commercial-real-estate/
FAQs
Can a SIPP or SSAS be used to buy commercial property?
Yes. SIPPs and SSASs can hold commercial property, which can then be leased to the member’s business or a third-party tenant.
What are the tax benefits of holding commercial property in a pension?
Rental income and investment gains within the pension are generally exempt from income tax and capital gains tax, subject to applicable rules.
How will the April 2027 inheritance tax changes affect pensions?
From April 2027, most unused pension funds and pension death benefits are due to fall within the scope of inheritance tax, making specialist tax and wealth advice increasingly important.
Why might business owners use a SIPP or SSAS for commercial property?
It can help separate property from the trading business, diversify wealth and allow rental income to build within the pension while supporting long-term retirement planning.
This article is featured in the Autumn 2026 edition of The Business magazine.
Distributed with The Sunday Times Scotland.
Partner Content in association with Aberdein Considine LLP