Commercial property investment has long been a favoured strategy for business owners looking to build wealth while securing their business’s future. Whether you’re looking to purchase the premises for your own business or invest in income-generating commercial real estate, SSAS pensions offer an incredibly flexible and tax-efficient way to do so.
In this blog, we’ll explore how you can use your SSAS pension to invest in commercial property, the benefits this offers, and why it’s an ideal strategy for business owners looking to grow their wealth while securing their business’s assets.
What is SSAS and How Does It Work for Property Investment?
A Small Self-Administered Scheme (SSAS) is a pension plan specifically designed for business owners and company directors. Unlike traditional pensions, SSAS gives you full control over how your pension funds are invested, providing you with the ability to invest in a wide range of assets, including commercial property.
With SSAS, you can:
- Purchase commercial property directly through the pension scheme.
- Use your SSAS to fund the purchase of property in which your business operates (known as “business premises”).
- Receive rental income from the property, which goes back into your SSAS fund, growing your pension pot tax-free.
This makes SSAS an attractive option for entrepreneurs looking to secure both their business and their retirement savings simultaneously.
Key Benefits of Investing in Commercial Property with SSAS
- Tax-Free Growth and Income
One of the standout benefits of using SSAS to invest in commercial property is the tax-free growth. Any capital appreciation or rental income generated from the property is not subject to capital gains tax or income tax. This makes SSAS property investments particularly attractive when compared to other types of property investment, where tax obligations can erode profits. - Tax-Deductible Rent Payments
If your business operates from a property purchased through your SSAS, the rent you pay to your SSAS is tax-deductible. This helps reduce your business’s corporation tax liability, freeing up capital for reinvestment into your company. This also provides a stable source of income for your SSAS, increasing the value of your pension fund over time. - Retaining Capital within the Business
By purchasing the commercial property through your SSAS, you keep the capital within the business. You’re not paying rent to an external landlord, which means the business can retain more of its profits. Additionally, any appreciation in the value of the property adds to your pension pot, further growing your wealth and securing your financial future. - Long-Term Wealth Building
Investing in commercial property through SSAS can provide long-term wealth-building opportunities. As property prices typically rise over time, the value of the commercial property owned by your SSAS can appreciate significantly, providing a valuable asset for your pension. Not only does this help you build wealth for retirement, but it also secures your business’s real estate needs for the future.
How to Buy Commercial Property Using SSAS
Buying commercial property with your SSAS is a relatively straightforward process, but there are specific rules and guidelines you must follow. Here’s a step-by-step guide to help you understand how to proceed:
- Set Up Your SSAS
First, you need to establish a SSAS. If you don’t already have one, you can work with a pension trustee or provider who specialises in SSAS pensions. You’ll need to ensure that your SSAS is set up correctly and that it complies with HMRC regulations. - Fund Your SSAS
Once your SSAS is established, you’ll need to fund it. Typically, business owners fund their SSAS through employer contributions, which are tax-deductible. You can also transfer existing pension funds into your SSAS if you have other pensions you want to consolidate. - Identify the Property You Wish to Purchase
Next, you need to identify the commercial property you want to purchase. The property can be used as a business premises for your company or as an investment to generate rental income. The SSAS can also invest in property outside of the business, such as retail, office spaces, or industrial units, depending on your investment strategy. - Conduct Due Diligence
Before purchasing any commercial property, it’s essential to conduct due diligence. This includes assessing the value of the property, understanding the rental income potential, and reviewing its location and market conditions. Engaging with professional advisors such as property agents and legal experts is key to making a sound investment. - Complete the Purchase
Once due diligence is completed, the SSAS can purchase the commercial property. The purchase will be made from the SSAS fund, and the title of the property will be held in the name of the SSAS trustee. The rent paid by your business (if applicable) will be paid to the SSAS, adding to the fund’s value. - Enjoy the Benefits
Once the property is purchased, you can enjoy the benefits of tax-free growth and income. If your business is leasing the property, the rent payments will grow your pension, reducing your corporation tax in the process.
Common Mistakes to Avoid When Investing in Commercial Property with SSAS
- Overextending Your SSAS Funds
While SSAS provides flexibility in investment, it’s crucial not to overextend your pension funds on property purchases that are outside your financial capacity. Always ensure that your SSAS has sufficient liquidity to cover any costs associated with the property, including maintenance and management fees. - Failing to Meet HMRC Regulations
SSAS investments must comply with HMRC rules. For instance, a property purchased by a SSAS must be used for business purposes if your company is occupying it. The property cannot be used for personal reasons, and it’s essential to maintain clear separation between business and personal use. - Neglecting to Diversify Your SSAS Investments
While commercial property can be a lucrative investment, it’s important to maintain a diversified portfolio. Relying too heavily on one type of investment can be risky, especially if market conditions change. A balanced SSAS portfolio that includes other assets, such as shares or bonds, can reduce overall risk.
Partnering with Experts for a Successful SSAS Property Strategy
Navigating the complexities of property investment through SSAS requires professional guidance. At Retirement Capital, we work alongside property experts, tax advisers, and pension specialists to ensure that your property investments align with your overall business and retirement strategy.
Our experienced partners can help you identify suitable properties, provide legal and financial advice, and ensure compliance with regulations. Whether you’re purchasing a commercial property for your business or expanding your investment portfolio, we’ll support you every step of the way.
Invest in Your Future with SSAS and Commercial Property
Investing in commercial property through a SSAS pension offers a unique opportunity for business owners to build wealth while securing their business’s future. The tax-free growth, rental income potential, and long-term capital appreciation make it an ideal strategy for those looking to combine their business and retirement planning.
If you’re ready to take advantage of the benefits of SSAS property investment, book a free consultation with Retirement Capital today. Our team is here to guide you through the process and help you make the most of your SSAS for business expansion and wealth building.
