SIPP used to buy commerical property for own company
Discussion
Say I wanted to buy a £450k commercial property through a SIPP and rent it to my company with the rent being paid directly into the pension pot. I see that a SIPP can borrow 50% of its asset worth. How would I get the initial £300k into the new SIPP in order to make the purchase when the maximum annual contribution is £40k? Or do I need to build up a pension of £300k first? Am I correct in assuming that the rent paid into the pot would fall outside the £40k pension payment limit, i.e. £40k a year plus rent could be paid in?
Thankyou in advance
Thankyou in advance
There is a carry forward facility for unused annual allowance. Wont ne £300000 though. Do you have any existing pension provision?
The rent is investment income so does not count against the annual allowance.
More than one sipp can combine to achieve the purchase.
If you operate via a ltd consider a ssas as an alternative to a sipp.
The rent is investment income so does not count against the annual allowance.
More than one sipp can combine to achieve the purchase.
If you operate via a ltd consider a ssas as an alternative to a sipp.
PurpleMoonlight said:
There is a carry forward facility for unused annual allowance. Wont ne £300000 though. Do you have any existing pension provision?
The rent is investment income so does not count against the annual allowance.
More than one sipp can combine to achieve the purchase.
If you operate via a ltd consider a ssas as an alternative to a sipp.
No current pensions, not even dormant ones we could use to claim unused allowance with. I know, I know, a very bad move. Hindsight etc. I shall research ssas, thanks.The rent is investment income so does not count against the annual allowance.
More than one sipp can combine to achieve the purchase.
If you operate via a ltd consider a ssas as an alternative to a sipp.
foxsasha said:
Say I wanted to buy a £450k commercial property through a SIPP and rent it to my company with the rent being paid directly into the pension pot. I see that a SIPP can borrow 50% of its asset worth. How would I get the initial £300k into the new SIPP in order to make the purchase when the maximum annual contribution is £40k? Or do I need to build up a pension of £300k first? Am I correct in assuming that the rent paid into the pot would fall outside the £40k pension payment limit, i.e. £40k a year plus rent could be paid in?
Thankyou in advance
Just a technical point, there is no actual maximum SIPP contribution limit, only a limit as to how much you can receive tax relief on (£40k of relevant earnings in this tax year).Thankyou in advance
You are therefore perfectly free to put £300k into a SIPP this year, but you will only receive tax relief on the first £40k (assuming you have £40k of taxable earnings this year).
If you are doing this with partners then each partner with sufficient relevant earnings can do the same (i.e. five people could invest £280k between them with full tax relief and can add the £20k balance without receiving any tax relief).
If you are looking to get the property into a SIPP for CGT free growth and to eventually provide a tax free cash lump sum (from the banked tax deductible rental income over the accumulation stage) and then an income in retirement from the rest this could still be a great option for you (without the tax relief).
JulianPH said:
Just a technical point, there is no actual maximum SIPP contribution limit, only a limit as to how much you can receive tax relief on (£40k of relevant earnings in this tax year).
You are therefore perfectly free to put £300k into a SIPP this year, but you will only receive tax relief on the first £40k (assuming you have £40k of taxable earnings this year).
If you are doing this with partners then each partner with sufficient relevant earnings can do the same (i.e. five people could invest £280k between them with full tax relief and can add the £20k balance without receiving any tax relief).
If you are looking to get the property into a SIPP for CGT free growth and to eventually provide a tax free cash lump sum (from the banked tax deductible rental income over the accumulation stage) and then an income in retirement from the rest this could still be a great option for you (without the tax relief).
All clear and understood, thankyou.You are therefore perfectly free to put £300k into a SIPP this year, but you will only receive tax relief on the first £40k (assuming you have £40k of taxable earnings this year).
If you are doing this with partners then each partner with sufficient relevant earnings can do the same (i.e. five people could invest £280k between them with full tax relief and can add the £20k balance without receiving any tax relief).
If you are looking to get the property into a SIPP for CGT free growth and to eventually provide a tax free cash lump sum (from the banked tax deductible rental income over the accumulation stage) and then an income in retirement from the rest this could still be a great option for you (without the tax relief).
I say £40k purely to minimise the tax payable, I understand tax will be levied on payments above that. My missus owns half the company so we can double up on payments into the SIPP.
There is no way round being able to carry forward unused allowance if a pension product hasn't been in place for the unused allowance years? No dispensation to allow half the allowance or similar?
There is no way round being able to carry forward unused allowance if a pension product hasn't been in place for the unused allowance years? No dispensation to allow half the allowance or similar?
JulianPH said:
Eh??? I know you know what you are talking about Purple, but what is this tax charge you speak of ...???!!!
It'c called the annual allowance tax charge.Here is a summary. This looks at it relevant to the tapered allowance but the principle is the same for all.
http://www.rossmartin.co.uk/private-client-a-estat...
foxsasha said:
I say £40k purely to minimise the tax payable, I understand tax will be levied on payments above that. My missus owns half the company so we can double up on payments into the SIPP.
There is no way round being able to carry forward unused allowance if a pension product hasn't been in place for the unused allowance years? No dispensation to allow half the allowance or similar?
Your wife will need to be a Director if you intend to make a pension contribution disproportionate to earnings.There is no way round being able to carry forward unused allowance if a pension product hasn't been in place for the unused allowance years? No dispensation to allow half the allowance or similar?
I am not aware of any way around the carry forward rules. I think it is unfair that you need a pension arrangement in place for the tax year in question. Someone could have only £100 in a rebate only personal pension from 1990 and can used the carry forward but you cannot, but them's the rules!
If your income is over £150,000 in the tax year you are subject to the tapered allowance too so less than £40,000 pension contribution is possible.
The pension arrangement can jointly own the property with the company though. Then it can acquire a greater share over time using future annual allowances.
For two members and a property, a SSAS is likely to be better for you than two SIPP's.
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