SIPP Property Purchase Calculator

How much commercial property can your SIPP buy?

A Self-Invested Personal Pension (SIPP) can own commercial property directly – offices, shops, warehouses, industrial units, GP surgeries, even bare land. For business owners the classic move is buying your own trading premises inside your pension: the company pays rent to your SIPP instead of to a landlord, and that rent lands in a tax-sheltered pot you will eventually retire on. The awkward question is always the first one: is my fund actually big enough? This calculator answers it. Enter your available SIPP value (including any old pensions you could transfer in), how much cash you want to keep back for fees and liquidity, and a costs estimate – it then applies the statutory 50% borrowing limit, deducts non-residential stamp duty and fees, and shows the maximum purchase price your scheme could actually complete, along with the loan repayments the rent would need to cover. Figures are planning estimates, not a lending decision.

The 50% borrowing rule explained

Under the Finance Act 2004 rules for registered pension schemes, a SIPP may borrow up to 50% of its net asset value. A fund worth £200,000 can borrow up to £100,000; a fund worth £400,000 can borrow up to £200,000. Three practical points trip people up:

• It is 50% of the fund, not 50% of the property price. Combined with the fund itself, the ceiling on gross spending power is 1.5× your net fund value – before stamp duty, legal fees and valuations eat into it.
• Existing borrowing counts. If the scheme already has a loan outstanding, the headroom shrinks pound for pound. This calculator assumes a clean, unborrowed fund.
• Lenders apply their own tests on top. The 50% figure is the legal maximum, not a promise. Commercial lenders will look at the property, the tenant's strength and whether market rent covers repayments with a margin, and may offer less.

Borrowed money is secured on the property, and repayments must come out of the SIPP itself – funded by rent, ongoing contributions and any other scheme income. If the tenant stops paying, the scheme still owes the bank, which is why the tenant's covenant matters even (especially) when the tenant is your own company.

What this calculator works out

• Maximum borrowing = 50% of the SIPP value you enter, assuming no existing scheme loans.
• Total purchase budget = fund minus your liquidity buffer, plus the borrowing.
• Maximum property price is solved so that price + non-residential SDLT + your chosen fee percentage exactly fits the budget. SDLT uses the England & Northern Ireland non-residential bands: 0% up to £150,000, 2% from £150,001 to £250,000, 5% above £250,000. Scotland (LBTT) and Wales (LTT) use different bands.
• Loan repayments use a standard repayment-mortgage formula at the rate and term you choose – treat the default 6.5% as an illustration; actual commercial pension-loan pricing varies with the market and lender.

Buying your own premises: the rent-back advantage

Most SIPP property purchases are owner-occupiers buying their own trading premises. The structure has a genuinely attractive tax profile, all of it mainstream and HMRC-recognised:

• Rent is deductible for the company. Your company must pay a full open-market rent, evidenced by an independent RICS valuation. That rent is normally an allowable expense against Corporation Tax at 25% (or 19% for small profits under £50,000).
• Rent is tax-free in the SIPP. The scheme pays no income tax on rent received, so 100% of it works for your retirement – first repaying any loan, then compounding.
• No Capital Gains Tax on sale. If the property is later sold by the SIPP at a profit, no CGT arises inside the scheme. A company selling the same property would pay Corporation Tax on the gain.
• Creditor separation. The premises sit in your pension, not on the company balance sheet, which can keep them out of reach if the business ever fails – though take insolvency advice on the details, and note the SIPP would then need a new tenant.

The discipline cuts both ways: because you and your company are “connected parties”, everything must happen at arm's length. The rent cannot be mates' rates (too low or too high), the purchase must be at market value, and the scheme must actually enforce the lease – HMRC can levy heavy unauthorised-payment charges when connected-party rules are bent. And residential property is off the table entirely: putting a flat or house in a SIPP triggers tax charges that can reach 55% of the value involved, plus sanction charges on the scheme.

Worked example

Dan runs an engineering firm and has £300,000 across his SIPP and an old workplace pension he can transfer in. He keeps £10,000 back for fees and liquidity, picks the 3% costs estimate and tests a loan at 6.5% over 15 years. His maximum borrowing is £150,000 (50% of £300,000), giving a total budget of £440,000 (£290,000 cash + £150,000 loan). Solving for price, the calculator shows he could complete on premises of about £417,000, paying roughly £10,400 in non-residential SDLT and about £12,500 in other costs. The loan would cost around £1,307 a month (≈£15,700 a year) – so the market rent his company pays, plus his ongoing contributions, need to cover that comfortably before the deal makes sense.

Costs and risks to budget for

Beyond the purchase price, a realistic plan should allow for:

• Stamp duty: calculated automatically here at England & NI non-residential rates. On a £400,000 unit that is £9,500 – materially less than residential rates, but not nothing.
• VAT: if the seller has “opted to tax” the building, 20% VAT is added to the price. The SIPP can often register for VAT and recover it, or the deal may qualify as a transfer of a going concern, but the cash-flow bump needs planning – ask your solicitor early.
• Professional and provider fees: legal work, RICS valuation, survey, lender arrangement fees, plus the SIPP provider's property charges – typically a setup fee and then an annual property administration fee, commonly a few hundred to over a thousand pounds a year depending on provider (estimates; check your provider's schedule).
• Concentration and liquidity risk: one building can end up being most of your pension. Property is slow to sell, so paying retirement benefits – or death benefits – can force an awkward sale. Keeping a cash buffer inside the scheme is not optional in practice.
• Tenant risk: if your own company hits trouble and stops paying rent, your pension takes the hit at exactly the moment your income does. Under reforms announced in the 2024 Budget, unused pension funds are also due to come within inheritance tax from April 2027, which changes some estate-planning assumptions.

A SIPP property purchase is one of the more complex retirement decisions you can make, and pension transfers into the purchasing SIPP can mean giving up valuable guarantees. Take advice from an FCA-regulated financial adviser before committing – the free, government-backed MoneyHelper service is a sensible starting point.

Frequently asked questions

How much can a SIPP borrow to buy property?

A registered pension scheme can borrow up to 50% of its net asset value. A SIPP worth £300,000 with no existing loans can therefore borrow up to £150,000, giving a gross budget of up to £450,000 before purchase costs. Any existing scheme borrowing reduces the headroom.

Can I buy residential property in a SIPP?

No. Residential property is “taxable property” for a SIPP and triggers unauthorised payment tax charges that can reach 55%, plus scheme sanction charges on the SIPP itself. SIPPs are used for commercial property: offices, shops, industrial units, surgeries and land.

Can my own company rent the property from my SIPP?

Yes, and this is the most common structure. Your company must pay a full open-market rent supported by an independent RICS valuation. The rent is normally an allowable expense for Corporation Tax, and the SIPP receives it free of income tax.

What stamp duty does a SIPP pay on commercial property?

The SIPP pays non-residential SDLT in England and Northern Ireland: 0% up to £150,000, 2% on the portion from £150,001 to £250,000 and 5% above £250,000. Scotland (LBTT) and Wales (LTT) apply different rates and bands.

Is rent received inside a SIPP taxed?

No income tax is charged on rent the SIPP receives, and no Capital Gains Tax applies when the SIPP later sells the property at a profit. Tax normally only arises when you draw benefits from the pension in retirement.

Can I pool several pensions or partners to buy a bigger property?

Yes. Business partners often combine their SIPPs (or use a SSAS) to buy premises jointly, with each scheme owning a share and contributing its own 50% borrowing capacity. You can also usually transfer old pensions into the purchasing SIPP first, subject to advice on any guarantees you would give up.

Sources: scheme borrowing and taxable-property rules from the HMRC Pensions Tax Manual; non-residential SDLT bands from GOV.UK – SDLT non-residential rates; free pensions guidance at MoneyHelper. Fee figures are market estimates and vary by provider and lender.