It’s that time of year when our thoughts turn to Hallowe’en, mid-term break, darker evenings, and longer nights in front of the fire. It’s also the time of year that many self-employed people turn their thoughts to their pension as the tax deadline is looming.
Using your pension to buy property.
While you can benefit from generous tax reliefs by contributing to your pension, individuals considering whether to invest in the property market might consider using their pension funds to purchase property.
One of the main benefits of using a pension fund to purchase property is that you can use monies which have not been subject to income tax to purchase the property. Property purchased outside a pension fund is purchased from post income tax proceeds, or else purchased using borrowings that must be repaid using post tax income.
Given the current marginal rates of tax, up to a maximum of 55%, significant savings can be made by using your pension fund to invest in property rather than investing through after- tax income
In addition, no income tax is payable on the rental income earned within your pension fund. When you choose to sell the property, no Capital Gains Tax (CGT) is payable on the proceeds of the sale. It is not compulsory to sell the property on retirement.
Reasons to invest pension in property
There are of course some restrictions on investors in terms of property investment. These include that you cannot use the property personally, it must be for investment only. When you do sell the property, it cannot be to relatives, your employer, or directors of associated companies.
Planning your retirement and managing your pension can be a complex task. Before undertaking any investments, you should speak with a Qualified Financial Adviser. They will be able to explain the choices available to you and help you understand your risk profile. Then if you are thinking of purchasing a property within your pension, just get in touch and we can help you secure the right property for your needs.