When? |
| Scheduled for introduction from April 6th 2006. |
| Top |
| Who? |
Anybody is eligible, if you have earnings or can transfer funds from existing pension arrangements. (Take independent financial advice). |
| Top |
How do I purchase a property? |
| Use existing funds which at the moment may be tied up until you retire
Mortgage of up to 50% of pension fund
Company and/or individual pension contributions
AVC's |
| Top |
From 6th April 2006 annual contributions can be up to: |
| 100% of earnings, if self employed, up to £215,000 tax free
£215,000 company contributions regardless of earnings, if employed, per member. For example, husband and wife, if directors of own Ltd company, can contribute £215,000 tax free each. |
| Top |
What are the benefits of using a SIPP? |
| Rental income free of UK income tax - paid gross
Fund grows free of UK tax
No UK capital gains on disposal of property
Outside of estate - free of inheritance tax
Contributions into plan qualify for corporation tax relief or personal tax relief at marginal rate i.e. Up to 40% |
| Top |
How can I benefit from personal tax relief if a lump sum is invested? |
You may invest, subject to maximum funding, and receive tax relief. For example;
- 40% tax reduction (subject to you being a higher rate taxpayer) when purchasing an overseas property for their fund - that means a property costing £105,000 can be yours for just £75,000.
|
| Top |
| Do I pay stamp duty and local taxes using the SIPP? |
Yes, it is the same as if you had bought it personally, but it is paid out of your pension fund, along with other associated costs such as professional fees and maintenance. |
| Top |
Is there any legal restriction as to location? |
No, but there are local restrictions at the moment. Not from April 2006. At this point your off plan investment can be brought into your SIPP. |
| Top |
Who will own the property in the SIPP? |
It is owned by the trustees, who hold it for your benefit, but you remain the beneficial owner(s) under the rules of the SIPP. |
| Top |
| Can I club together to buy property with others? |
Yes - see previous comment about contributions. This is known as Syndication, so for example with:
- Family
- Friends
- Partners
- Spouse
- Unconnected Parties
|
| Top |
The Family SIPP? |
- No minimum age restrictions
- Can include family and/or circle of friends
In many cases this will form an essential part of IHT planning for UK and Worldwide assets. |
| Top |
Is it possible to form a Syndicate to buy property of higher value, or more than one property? |
Yes, you can club together and it is possible to borrow up to 50% of each individual fund as well. |
| Top |
Negatives |
| It is a pension and you cannot draw benefits until you are 50 under current rules and it is not a liquid asset
Personal use could create an income tax liability unless you pay a market rent to your SIPP
You cannot ″trade″ properties |
| Top |
| How do we pull all this together? |
Understanding the new legislation to take full advantage of this exciting opportunity is no simple task. Please seek advice from specialist advisers covering:
- Tax Advice
- Legal Advice
- Mortgage Advice
- Independent Financial Advice
We will naturally be pleased to assist with the selection of suitable ″off plan″ and/or resale investment properties |
| Top |
What Do I do now? |
In the first instance,
- Take independent financial advice through a qualified financial consultant or contact your Bank to asses both your personal suitability and/or existing pension planning suitability.
They will further assist you in:
- Setting up your SIPP or Syndicate Group Property Purchase
- Arrange Pension transfers where suitable(can take up to 6 months)
- Arrange Pension contributions
|
| Top |
