Updated: June 18, 2019

SIPPs and Buy to Let Properties

What type of buy-to-let property can you put in a SIPP? Read on to find out everything you need to know.

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 18, 2019

We receive a lot of enquiries from both existing SIPP members and people considering using a SIPP for their retirement savings. Many of them want to know more about what types of property schemes can be used as part of their overall portfolio, specifically buy to lethouses of multiple occupancy (HMO) and student property.

To answer these questions we have produced this detailed article which covers the following topics:

Can you put a buy to let property into a SIPP?

Self-invested personal pensions (SIPPs) allow access to a huge amount of different types of investments across a vast array of asset classes – including property – whilst offering tax relief on all of your pension savings.

We are often asked by our customers ‘Can I put buy to let property in a SIPP?’ Whilst none of HMRC’s rules on SIPPs impose a ban as such on particular property schemes, certain types of property are deemed as ‘taxable’ and can result in a large tax charge being applied.

Direct property

As a general rule of thumb, property which is used for commercial purposes can be placed directly into a SIPP pension fund.

This includes any freehold or leasehold commercial business such as:

  • Offices
  • Factories
  • Pubs or Hotels
  • Shops
  • Care homes
  • Agricultural land

Residential properties, including buy to let portfolios, are viewed by the HMRC to be taxable and would therefore incur a penal tax charge (usually 55% of the value of the investment) if they are included within a SIPP pension fund.

Such high tax penalties make SIPP pensions unviable as a direct home for traditional buy to let property. However, there are some exceptions to this.

Job-related residential property

There are two categories of job-related residential property that would not be deemed as taxable if they were held either directly or indirectly within a SIPP pension:

  • The property is occupied by an employee who is not a member or connected to a member of the SIPP, nor are they connected to the employer and are required to occupy the property as a condition of their employment

An example of the above would be a caretaker’s flat.

  • A property is used in connection with commercial premises held by the SIPP scheme and is occupied by someone who is not a member nor connected with a member.

An example of the above would be a flat or apartment above a shop or pub where the SIPP scheme rents the business and the flat to someone who occupies and runs both.  A pub manager, for instance.

Investment funds

Whilst holding direct rental property in a SIPP is not viable, it is possible to invest in any number of residential property funds such as a Real Estate Investment Trusts (REITs) without incurring any onerous tax charges.

These types of investment funds offer exposure across a whole range of property assets otherwise deemed off limits for SIPP pensions. They can also focus on particular geographical regions such as large urban areas or specific cities (London, Leeds, Manchester, Birmingham).

Choosing the right investment fund for your SIPP can be tricky, this is where we can help. The advisors we work with adopt a whole of market approach and will be able to identify and select only the very best fund managers across any type of asset class.

If you’d like to know more about this, make an enquiry and we can arrange for one of the experts we work with to contact you directly.

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Can you put an HMO property into a SIPP?

house of multiple occupancy (HMO) would hold the same residential status as a traditional buy to let property, therefore, would be unviable to hold directly within a SIPP pension.

However, a number of residential property investment funds focus specifically in this area and could offer your SIPP exposure to this type of asset class.

If you have a SIPP or are looking to take one out and would like to know more about investment funds with HMO properties as part of their portfolio, make an enquiry and we can arrange for an advisor we work with to get in touch.

Can you put a student property into a SIPP?

Student property would usually be categorised as either a house of multiple occupancy (HMO) or a traditional buy to let that resides within easy access of an educational centre and specifically offered to students. As such it would still be deemed as residential, therefore, not appropriate for direct investment into a SIPP.

As with buy to let and HMOs, there are a number of investment funds and Real Estate Investment Trusts (REITs) that would offer specific exposure to this type of asset class and would be available for inclusion within a SIPP.

Student halls of residence fall into the category of commercial premises and would be a viable investment opportunity for a SIPP pension to purchase as part of its overall portfolio.

HMRC has specific rules on the definition of halls of residence that would differentiate from student property which you can read here.

If you have a SIPP or looking to take one out and would like to know more about investment funds with student property as part of their portfolio, make an enquiry and we can arrange for an advisor we work with to get in touch.

Should I invest in a buy to let or a SIPP to see me through retirement?

Trying to decide whether to use either a SIPP or a buy to let portfolio for your retirement savings would really be determined by your own personal circumstances.

The key benefit with a SIPP is the vast array of investment funds and freedom of choice you have for your pension money all within the most tax efficient wrapper available.

However, a SIPP is a long term investment where the funds would not be available to draw upon until you reach 55 years of age. If you’d prefer to have access to funds before this age, if necessary, and have a desire to only invest directly within the buy to let market, then building your own portfolio could be the best option for you.

Speak to a SIPP expert about buy to let investments

Property can be quite a valuable addition to your SIPP pension but there’s more to it than just bricks and mortar. Lots of people in your situation seek professional advice to assist them make the right investment decisions.

If you have questions and want to speak to an expert for the right advice, call Online Money Advisor today on 0808 189 0463 or make an enquiry here.

Then sit back and let us do all the hard work in finding the pensions advisor with the right expertise for your circumstances.

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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