News

New rules could boost property prices

The Sunday Times - 20th Febraury 2005

House prices could get a once-for-all shot in the arm next year because savers will be able to use their personal pensions to buy residential property, according to the homebuyer show.

You can already buy commercial property with a self-invested personal pension (sipp), but from april 2006 you will also be able to purchase buy-to-lets, holiday homes and even your main residence.

Commercial Property

Many people use sipps to buy their business premises.  They than pay the rent to their pension fund rather than a landlord.  The rent attracts tax relief and is also free from income tax within the fund.  The property would also be exempt from capital-gains tx (CGT) on any profits when it is sold.  At present a sipp can borrow up to 75% of the value of commercial property to fund the purchase, but April next year you will be able to borrow only 50% of the value of your fund.  So a fund of £100,000 will get you a property of only £150,000.

Residential Property

From april next year residential property will qualify for sipps.  Buy-to-lets or holiday homes can be trasferred into your pension where rental income and capital gains will be tax-free.  However, this will be considered a sale, with CGT on any profits.  You will also have to pay rent or extra tax if you or your family stau in the property for part of the year.  If your fund sells it, you will not be able to access the money until the age of 50, or 55 from 2010.  Alternatively, you can keep property beyond the age of 75 as you wont have to buy an annuity.  When you die, it could be pass to your heirs, but they may have to pay tax on the transfer.