Tax Advantages for Property Investors

If you are building a property investment portfolio, understanding the tax implications of any investment decisions you make is key to maximising your income, now and in the future. For this reason, many property investors are turning to a SSAS pension scheme as a vehicle to invest in property due to it’s not-unsubstantial tax relief benefits. Let us explain…

When you have a property portfolio, the recommendation is usually to treat it like you would any other business, and this is especially true of the business structure and tax strategy you use.

Tax Benefits

There are several tax benefits for property investors who choose to invest in property through a pension, with a SSAS (Small Self-Administered Scheme) being a popular choice.

Once you have successfully set up a SSAS pension scheme and registered it with the necessary bodies, you can then start contributing to it (either personally or through your company). Subject to annual allowances, you will receive tax relief on all contributions paid into a pension scheme, whether that’s as an individual (‘tax relief’) or as a company (‘corporation tax deduction’).

Once the SSAS is funded and has invested into a property, any income from that property will be received tax-free into the scheme (which means no income tax or corporation tax on the rents). This is worlds apart from the taxes you would be charged if earning income through property in a standard business structure.

Investors don’t just receive immediate financial benefits when investing through a SSAS, but prospects for the future look brighter too. If, and when, a property is sold in the future, there will be no tax on the gross value either (so no capital gains tax).

Succession

When you pass on, the entire value within the pension (rental income and gross) will be outside of the investor’s estate for inheritance tax purposes, which is great for succession.

There is much miscommunication and misunderstanding about investing in property using a pension scheme and many financial advisors may even tell you it can’t be done. But as a pensions and tax specialist, we can assure you it is absolutely possible, as long as the pension scheme you invest through is correctly structured and maintained. To learn more, or if you have any questions, download our latest PDF guide which explains the process in more detail.