For a business owner, the ability to hold commercial property within a personal pension scheme and rent it back to your own company is one of the most tax-efficient ways to buy a property while strengthening your future pension savings. Your contributions are no longer just sitting in traditional investments. Instead, they can be held in a SIPP, owning tangible assets that build wealth for retirement.
This Guide explains exactly how a Commercial Property in a SIPP works. From HMRC rules and compliance through to the landlord and tenant relationship when your own company is the occupier. If you want to Invest in Commercial Property through your pension, read on.
A SIPP, or self-invested personal pension, is a flexible type of pension that gives you greater control over your retirement planning. Unlike a standard pension plan or workplace fund, a SIPP allows you to make your own Property Investment choices.
One popular use is buying commercial properties with a SIPP. In this arrangement:
• The legal title is held by a SIPP trustee
• The property held becomes part of your registered pension scheme
• All rental payments are received tax-free into the pension fund
While commercial properties are allowed, Residential Properties are not. Attempting to purchase residential assets through your SIPP or SSAS could trigger a large tax charge under HM Revenue rules.
Holding a commercial property through a SIPP brings several advantages:
• Your pension becomes the landlord, while your company acts as the tenancy holder
• Rental income is paid back into your own fund, not to an external landlord
• The value of the property may rise over time, and any gain is exempt from capital gains tax within the pension
• Assets held within a registered pension are generally protected from creditors
Essentially, Investment in Commercial Property strengthens both your retirement and your business position
The types of commercial property that may be held include:
• Offices • Warehouses and factories
• Retail shops • Commercial premises used by businesses
Some commercial properties with a residential element (such as shops with flats above) may also qualify, but a property questionnaire and checks are required. If the premise requires residential occupation, significant tax charges can apply.
Your SIPP provider, regulated by the Financial Conduct Authority, ensures the property that is held complies with the rules.
The process to buy a commercial property through a pension is similar to a standard property purchase, but with added steps.
• Your pension fund must be able to fund the purchase fully, or a SIPP may allow borrowing of up to 50% of plan assets (a flexible option when purchasing a commercial property).
• The property is held by the trustee inside the scheme.
• You cannot live in the building — it must remain solely for commercial purposes.
This system of using a SIPP to buy ensures compliance while giving freedom to build value in your pension scheme.
All commercial property investments through a SIPP or SSAS must follow these strict rules:
Failure to comply may result in an unexpected tax charge that wipes out the tax advantages of holding a property in a SIPP.
Every SIPP investment in property involves oversight:
• The trustee holds the property owned on behalf of the pension
• A property manager may handle repairs, paperwork, and annual property checks
• The SIPP provider ensures compliance and protects your pension savings
This ensures that every property that is held remains within HMRC rules.
For an entrepreneur, owning a commercial property through a pension is a unique opportunity to be both landlord and tenant, with rental payments going back into your own pension fund.
Assets inside a registered pension scheme are protected from business creditors and when you eventually sell the property, profits are exempt from capital gains tax
This makes holding a commercial property an ideal retirement strategy for any business premises owner.
Main tax advantages of commercial property investments within the SIPP include:
✔ Rental income is free from income tax
✔ Gains when you sell the property are exempt from capital gains tax
✔ Commercial property that is held within a pension is normally outside your estate, limiting inheritance tax liability
No other pension scheme investment combines such a unique blend of retirement and estate planning advantages.
If your company occupies the commercial premises you purchase, you must sign a market-based lease with your SIPP. All rental costs must reflect independent valuations.
This relationship balances your role as tenant (the business) with your role as landlord (the pension). In practice, instead of losing rent to outsiders, your pension savings grow from your own business activity.
Like any investment, commercial property owned within a pension is not risk-free:
✖ The property market can fall, reducing the value of the property
✖ If the premise becomes vacant, rental income will stop
✖ If the property requires repairs, extra contributions may be needed
✖ Breaking HMRC rules risks a heavy tax charge
Solid planning with professional financial advice minimises exposure to risks.
At some point, you may wish to sell the property or exit the SIPP investment. When selling a property, the provider handles the process. The proceeds remain held within the scheme for reinvestment or transfer to another registered pension scheme.
Often, the strategy of using a SIPP to buy a commercial property pays off as gains realised are exempt from capital gains tax, especially when the value of the property has appreciated.
Yes. While every SIPP offers flexibility, using a pension for property purchase is complex. An independent financial adviser will liaise with your SIPP provider, solicitor, and property manager. They will ensure all transactions comply with HMRC rules and align SIPP investment property with your retirement goals
Good advice keeps your pension scheme safe from costly mistakes.
• Commercial properties can be held in a SIPP, but residential properties are excluded
• A business owner can buy commercial property through their pension scheme and occupy it
• Rental income strengthens your pension fund, not an external landlord
• HMRC rules require all deals to be on a commercial basis with a proper lease
• Tax advantages include no income tax on rent, no capital gains tax on growth, and possible inheritance tax protection
• A SIPP may borrow up to 50% to fund the purchase of property
• The SIPP trustee ensures legal compliance while you benefit from growth
• Risks include property vacancy, when the property falls, or the property requires extra funds
• Exiting is possible through selling a property or transferring the property held in a SIPP
This information is provided for general guidance only and should not be considered financial advice. You should seek independent, qualified financial advice before making any investment decisions.
For an in-depth look at the rules of property purchase, see our detailed guide.
Learn more about ownership considerations in property purchase here.