If you’re a director of a UK limited company and like to have control over your financial future then you could be missing out on significant tax advantages by not considering SSAS property investments
Today we take a look at types of SSAS property investments and how a SSAS could also protect your wealth and allow you to invest into property virtually tax free.
What is a self-invested pension plan?
Have you ever heard of a SIPP? They’re aimed at the self-employed and allow you to make your own investment decisions for your pension, rather than a pension provider making the decisions for you.
Just like a work place pension a SIPP provides numerous advantages over cash investments, such as income tax relief and the ability to draw down a tax free lump sum at age 55.
However one of the possible disadvantages of a SIPP is the limitations on what you can do with the funds and the types of investments you can make.
Although you can use a SIPP to invest into property, it can be quite difficult and you’ll often be tied into a selection of investments that are pre-approved by your SIPP provider.
How is a SSAS pension different?
SSAS stands for ‘small self-administered pension plan’. They’re designed for individual or small groups of directors to self-direct their own pension plans.
You can set up a SSAS as an individual director and include family members, or as a group with other directors and employees.
Unlike a SIPP though each member of the SSAS actually becomes a trustee. This means you and any other members get complete control to invest into anything you want
Sounds great, right? It can be, but there are still HMRC guidelines into what investments qualify for tax relief and which ones don’t.
Therefore it’s important to get this right on any SSAS property investments you make, so remember to get professional advice before making any investments.
What are the benefits of a SSAS?
Setting up a SSAS can provide many advantages such as:
- Tax relief on your personal and business income
- No income tax on investments
- No capital gains tax when selling investments
- A tax free lump sum from the age of 55
- The ability to loan funds out from the SSAS
- The ability to transfer other work place pensions or assets into your SSAS
- A way to shelter your wealth from the tax man for your family and future generations
Now we understand some of the advantages of running a SSAS, how could you use one to invest in property?
How to invest in property with a SSAS
Although you cannot DIRECTLY buy residential property with a SSAS, there are multiple indirect ways you can.
Let’s a take a look at some SSAS property investments you could consider…
Convert a commercial property into residential property
Hands on investor? With relaxed permitted development rights in the UK there’s never been a better time to buy old commercial buildings such as pubs, restaurants, factories and warehouses.
Guess what? Commercial property like this can be directly purchased into a SSAS, and could then be converted into residential by using permitted development right laws.
The development could then be sold on providing a tax efficient return back into the SSAS.
Because this strategy is repeatable, it can be a great way to grow a pension pot and it’s probably one of the easiest SSAS property investments available.
Provide bridging finance to developers or property professionals
Picture this: a property developer has found an exciting opportunity to build some housing…but they need a little help with the funding
You know your SSAS allows you to issue loans, so being the savvy investor you are you see an opportunity to strike a deal.
In return for the loan you agree a fixed share in the profits and also take security over the property until the development completes.
If you’re looking for something passive then SSAS property investments like this can show high digit annual returns without the hassle of construction, solicitors, or tenants.
Interested in these kind of investments on a smaller scale? Be sure to take a look at our article on property investment bonds
Borrow money from your SSAS to invest in property
One of the secret weapons only available to SSAS is the ability for you to lend money from it at very low rates.
You can currently lend up to 50% of the value of your SSAS, so a pot of £300,000 could mean gaining access to up to £150,000 of your pension. You could even use those funds as a deposit towards a mortgage.
Combined with the ability to draw down a tax free lump sum at aged 55, this can be one of the most attractive SSAS property investments available to access your pension funds for property investing.