Updated: September 18, 2019

Using a SIPP to Buy Commercial Property

Can you use a SIPP to buy commercial property? The expert advisors we work with are on hand to show you how it's possible

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: September 18, 2019

Self-invested personal pensions (SIPPs) give you more control over your investments than most other pension products, and one of the most exciting ways you can invest your money is by putting it into commercial property.

In this article we’ll take a look at what you need to be aware of it you’re thinking of buying commercial property in a SIPP, addressing some of the main questions our customers tend to ask us, including:

Can I buy commercial property with a SIPP?

This will depend on how much you have invested and the value of the property you wish to buy, but in the right circumstances you can certainly use your SIPP to purchase commercial property.

There are a few ways to do this:

Investing in commercial property

In this scenario you won’t personally own the property, but you’ll benefit from any rise in its value. This is essentially the same as investing your pension in any other fund where the performance of stocks or other assets affects how valuable your pension is.

This could be a good option if you want to invest in property but don’t currently have the funds in your SIPP to buy a premises of your own, or if you don’t want to be responsible for its maintenance.

Buying commercial property

Alternatively, your SIPP can take out a mortgage to buy commercial property directly: you can borrow up to 50% of your SIPPs value from a lender such as a bank or building society. It’s also possible for a group of people to combine the funds held in their SIPPs to buy property jointly.

As this is the most direct way of using your SIPP to buy commercial property, we’ll focus on this topic for most of the rest of this article.

Transferring commercial property

You can also transfer any existing commercial property you own into your SIPP, essentially using this asset to make a pension contribution in place of a cash lump sum. The value of the property will then be invested, and you’ll get tax relief on the transfer, too.

Putting commercial property into a SIPP has its own risks and rewards not covered in this article, but if this is an option you’d like to explore, you may benefit from professional advice. Make an enquiry here if you’d like to speak to a specialist advisor with experience in this area.

SIPP overseas commercial property

It may be possible to purchase property abroad (so long as the property itself meets the insurer’s criteria), and you may gain some tax benefits if you opt for a country with more lenient local taxes.

However, there are typically higher costs involved compared with buying a commercial property where you currently reside, plus there may be a larger currency risk, too. It’s also worth noting that any foreign documents would have to be translated and therefore incur more costs on your part.

Because of the number of potential risks involved and legal complications, it’s worth speaking with an expert to see if this is a viable option for you.

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What commercial property can you buy?

It’s possible to buy a wide range of commercial properties using a SIPP. The property itself can be (but doesn’t have to be) connected to your own business. The main stipulation is that its purpose is commercial, and you are free to rent out the property if you choose to do so.

As for the types of commercial properties that are acceptable, this is ultimately up to the lender, but most viable business premises are likely to be allowed—even wind turbines and zoos are investable assets with SIPPs. Exceptions can include petrol stations, some agricultural premises or buildings with major structural problems, as is the case when making any property purchase.

Can you buy SIPP commercial property with a residential element?

In most cases it’s not possible to use a SIPP to buy property with any residential aspect, because this would attract significant tax charges. But there are some very specific exceptions.

These may include:

  • Business premises with a ‘live-in’ employee (who is not a member of the owner’s SIPP scheme) such as a caretaker, warden or concierge.
  • Flats that form part of commercial premises, such as pubs or shops, where a key staff member, e.g a pub manager, is resident. Again, this person must have no involvement with the owner-scheme or any of its members.

Cheapest SIPP commercial property

As a potential investor, it’s important to weigh both cost and quality of your potential investment, but don’t just focus on the cost as you may be missing out on a great deal.

The risks and potential returns of any asset should be assessed before making an investment to avoid making a costly mistake. Many SIPP providers will have investments already on offer, and some even prepare ready-made portfolios based on your affordability and risks.

You can get low cost SIPPs, and these may be a good option if you have a smaller pension pot, though bear in mind that they typically offer a limited range of products compared with a full SIPP product, so it’s worth making sure it includes the type of investment you want before proceeding.

For the best advice on how to find the SIPP commercial properties for the best price, make an enquiry.

SIPP commercial property rental income

One of the main advantages to investing in a commercial property through your SIPP is that income tax is exempt on rental payments.

Most SIPP providers will require the property to meet a minimal annual income (for example £2,000 per year) , and if you’ve had to borrow through your SIPP, the borrowing repayments would need to be funded through the rental income.

If you want to develop a property through a SIPP, providers will typically require you to enhance the value of the property, increase rental income and increase the benefits of your SIPP.

Property development in a SIPP

You also have the option of purchasing land for the purpose of property development with a SIPP, even if the property you intend to develop will be residential when built.

You can also use funds in your SIPP to borrow money to put towards developing any existing premises you own purchased through the SIPP, as long as your lender is happy with the works being proposed, and you can demonstrate that you’ve shopped around for quotes.

Should I buy commercial property with my SIPP?

Using your pension fund to purchase property can look like a very appealing prospect, but to decide whether this type of investment is for you, you’ll need a good idea of the pros and cons. The summary below sets out some of the main risks and benefits to be aware of:


Advantages of buying commercial property through your SIPP include various forms of SIPP tax relief on commercial property,  and a using a SIPP is usually the most tax-efficient way of buying business premises.

Key advantages include:

  • Rents can be re-invested in the SIPP
  • No income tax to pay on any rents you receive
  • If you’re paying the rent, it is still a tax-deductible business expense
  • No capital gains tax due when you sell
  • Proceeds of the sale when selling commercial property in a SIPP go into your pension
  • Property is usually a good long-term investment
  • The property is considered to be outside your estate for tax purposes
  • Inheritance tax may not apply in the event of your death
  • The property cannot be seized by creditors in the event of bankruptcy
  • It can allow you to buy your business premises where ready cash is not available
  • Collective purchase is an option


On the other hand, as with all investments there are certain risks to be aware of.

These include:

  • The occupying business must pay market rent, on time and according to normal commercial rental terms, even if it’s your own business.
  • You will incur various commercial property SIPP charges including legal fees, surveyor fees and covering the cost of regular inspections to ensure terms are being adhered to.
  • You’re responsible for the upkeep of the property whether or not it’s occupied
  • If the property is your primary retirement investment, you could be heavily exposed financially if it does not perform well.
  • You may be unable to sell at a time when you need quick access to liquid funds.

HMRC commercial property rules for SIPP

HM Revenue and Customs (HMRC) imposes no restrictions on what type of property can be purchased through your SIPP. However, if HMRC deem the property to be residential, you could be hit with a large tax bill of at least 55%, and this will be applied personally and not through your SIPP.

All SIPP commercial property must fit within HMRC’s rules and regulations, which is why it’s important to speak with an expert who has an in-depth knowledge of HMRC in order to properly manage your SIPP investments and reduce any risk.

Make an enquiry here to get started.

SIPP commercial mortgage rates

The interest rate you can expect to pay on a SIPP mortgage will be higher than the rates on equivalent residential products, as is the case for all commercial mortgages, but the actual rate will vary considerably from one case to the next. For this reason, it’s important to work with an experienced advisor to ensure you are getting a fair deal.

Your rate will be worked out on a bespoke basis, taking into account the property, your business’s performance, your personal risk profile and more. Make an enquiry to find out more about commercial mortgages and how to get the best rates.

How to find commercial property SIPP providers

Some of the best known banks and other lenders offer SIPP mortgages, as do several specialist firms. To find the best deal for you, we recommend speaking to a professional advisor who has experience of arranging SIPP mortgages, and can provide guidance in this often complicated area.

Speak to an expert

If you have any further questions about using a SIPP to finance commercial property, would like some advice or are keen to get started on a purchase using your SIPP in the near future, the expert advisors we work with are on hand to help you realise your vision.

Speak to an expert on SIPP commercial property today by calling us on 0808 189 0463 or leaving a message here with a brief outline of your requirements, and we’ll be in touch soon to discuss the next steps.

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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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