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Holding Commercial property in your pension scheme has never looked more favourable as an alternative to the popular option of holding ‘buy to let’ property personally.
The pension fund can only hold commercial property, whereas an individual can hold either commercial or residential property personally.
What are the benefits of holding commercial property in a pension fund?
Commercial property held in a tax exempt pension fund means that:
With recent pension freedoms should I take some or more money from my pension fund?
If you are thinking of withdrawing funds from your pension to purchase a ‘buy to let’ property then you should consider the following:
Recent changes in legislation that have swung the pendulum further in favour of commercial property are:
Stamp duty (SDLT) on Commercial Property for values under a million has typically fallen, as the rates are now tiered.
|Property or lease premium or transfer value||SDLT rate|
|Up to £150,000||Zero|
|The next £100,000 (the portion from £150,001 to £250,000)||2%|
|The remaining amount (the portion above £250,000)||5%|
Consider buying a commercial property valued at £300,000
The stamp duty costs would be:- £4,500
Prior to the 17th March 2016 changes the stamp duty costs would have been £9,000.
For second residential properties there will be an additional charge on stamp duty of 3% on all properties valued over £40,000.
Consider buying a ‘buy to let’ property valued at £300,000
The stamp duty costs would be:- £14,000
Prior to the 17th March 2016 changes the stamp duty costs would have been £5,000.
It should also be noted that higher rate tax relief is no longer given to those who have mortgages associated with their ‘buy to let’ properties.
In conclusion, if you are looking at property as an asset to hold as an investment, then consideration should be given to commercial property and the opportunity of holding it through a pension fund. Please note that not all pension funds will allow directly held commercial property and you will need to utilise a bespoke pension provider.
For further information on holding commercial property in either a SIPP or SSAS pension fund, please visit our technical guides or contact Kerry Houghton on 01772 550614 or via email firstname.lastname@example.org