The change between tax years is an important time for business owners and investors in the UK. At Holland Asset Management, we talk about the “Intentional Landlord”; someone who treats property like a professional business rather than a hobby. The goal is to reach financial freedom by building a balanced mix of assets, including property, ISAs, stocks, and pensions.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home or other mortgaged property may be repossessed if you do not keep up repayments on the mortgage or any other debt secured on it. The Financial Conduct Authority does not regulate tax advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
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This information is sourced from Holland Asset Management. Dental & Medical Financial Services do not take responsibility for the accuracy of third-party content.
This article was approved by Best Practice IFA Group Limited on 11 May 2026.
If you are a doctor or dentist looking to invest in commercial property, the “how” is now just as critical as the “where.” Find out more in this article provided by Holland Asset Management – a leading property investment consultancy.
Today, taking profits out of a company through high salaries or dividends is becoming more expensive due to high tax rates. As a result, using your pension to buy commercial property has become one way to keep and potentially grow your wealth.
Our approach is about more than just buying buildings. It is about careful tax planning and long-term strategy. By understanding the “18-year property cycle,” investors can plan for different scenarios. As the tax year resets, we focus on moving “idle capital”—money sitting in business bank accounts earning very little interest, into tax-efficient investments like a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS).
Retained profits and the cost of taking cash out
Many successful businesses have extra profit left over that they don’t need for daily operations. This money often sits in reserve accounts where its value is slowly eaten away by inflation. The problem for directors is that taking this money out personally can be very expensive. Some directors take a small salary (up to the £12,750 tax-free threshold (26-27 tax year), also known as your personal allowance) and top it up with dividends to stay under the £50,270 tax limit. Once you go above that limit, the tax you have to pay goes up significantly.
The standard pension allowance (also known as the Annual Allowance) is the maximum total amount that can be contributed to all your pension schemes in a tax year while still receiving tax relief. For the 2026/27 tax year this is £60,000.
There is however also an income threshold to bear in mind here – for the 2026/2027 tax year, if an individual’s income exceeds £200,000 alongside £260,000 of “adjusted income”, their standard pensions annual allowance of £60,000 is reduced (also known as tapered) by £1 for every £2 over the limit, down to a minimum of £10,000.
The purpose of this “Tapered Threshold” is to limit tax-efficient pension savings for high earners.
Understanding pension contribution limits
As mentioned above, for the 2025/26 and 2026/27 tax years, the standard amount you can put into a pension is £60,000. If you need more than that to buy a property, you may be able to use a rule called “carry forward”.
Carry forward allows you to use any leftover allowance from the last three tax years. Right now, you can look back at 2023/24, 2024/25, and 2025/26.
The 60% tax trap
High earners need to be aware of a “tax trap” between £100,000 and £125,140 in income. In this range, you lose £1 of your personal allowance for every £2 you earn, which creates an effective tax rate of 60%. Investors may be able to avoid this by making a pension contribution at the end of the tax year. This could lower your taxable income toward £100,000 and potentially avoiding the tax trap, giving you better value than just keeping the cash.
This is clearly a complex area of financial planning that may require further explanation.
Dividends
As dividend taxes rise in the 2026/2027 tax year – 10.75% for basic rate tax payers, 35.75% for higher rate tax payers and 39.35% for additional rate tax payers – our Retained Profit Investment Strategy may be useful. This strategy involves investing business profits into property or other assets before you pay personal tax on them. One of the options to do this is by making company contributions to your pension. These payments are usually tax-deductible for the business, which lowers the company’s tax bill while building your personal retirement fund.
Marginal Relief
To add further context, UK companies with augmented profits between £50,000 and £250,000 pay a 25% main rate but may be able to claim what is known as Marginal Relief to reduce their tax bill.
Using SIPP and SSAS for property
You can hold commercial property inside a SIPP (Self-Invested Personal Pension) or a SSAS (Small Self-Administered Scheme).
The main benefits of pension property
- No Income Tax: You don’t pay tax on the rent the pension receives.
- No Capital Gains Tax (CGT): If the property goes up in value and you sell it, the profit is tax-free within the pension.
- Lower Corporation Tax: If your own business rents the building, the rent you pay is a business expense, which reduces your company’s tax bill.
- Creditor Protection: Generally, property held in a pension is protected if your business suffers financial difficulty.
SIPP vs. SSAS
A SSAS is often preferred by small business directors because it is more flexible. For example, a SSAS can lend up to 50% of its assets back to the business for a commercial purpose. This loan must be secured and repaid within five years with interest. A SIPP cannot do this.
Borrowing to buy property
Your pension doesn’t need to have the full purchase price in cash. Both SIPPs and SSASs can borrow up to 50% of their total value to help buy a property.
However, you must be careful. The 50% limit is calculated immediately before the loan is taken out. If the value of other investments in your pension (like stocks) drops suddenly, the loan might exceed the 50% limit. This is called unauthorised borrowing, and leads to a 40% tax penalty on the extra amount. Having a buffer may avoid this risk.
What property can you buy?
HMRC is very strict: pensions can only buy commercial property, not residential houses. Buying a house in a pension can lead to massive tax charges of 40% or more.
Allowed properties include:
- Warehouses and industrial units.
- Offices and shops.
- Gyms, restaurants, and bars.
- Doctors’ surgeries and nurseries.
- Farmland or development land.
If a building has both a shop and a flat (like a flat above a shop), it can be complicated. Usually, the flat must have its own separate entrance and no internal link to the shop for the shop to be allowed in the pension.
How to buy your first investment property
For a first-time investor, the process starts with our Property Investment Accelerator. We move you away from “guessing” and toward a professional business mindset. We even use personality tests (DiSC® profiling) to see what kind of investor you are and the level of risk that you are comfortable with.
The 4-step roadmap:
- Market Knowledge: Understanding that property markets are local. Don’t just buy near your home because it’s comfortable.
- Financial Health: Checking your true buying power by looking at all your assets and debts.
- Correct Structure: Deciding if it’s better to buy personally, through a company, or through a pension.
- Due Diligence: Checking the actual sales and rental history of a property, not just what the brochure says.
We look for high-growth areas in the UK where rent yields are between 8% and 15%. We focus on places with good transport, strong economic development, and strong employment. The North East of England is performing strongly on all counts, so our focus is there.
Rules for renting to your own business
If your pension buys a building and then rents it back to your company, this is a connected-party transaction. This is legal, but you must follow the rules:
- Fair Rent: The rent must be the same as what a stranger would pay. You must get an independent RICS surveyor to set this market rate.
- Formal Lease: You must have a proper, written lease agreement.
- Pay on Time: Rent must be paid when it’s due. If you are consistently late, HMRC can charge a 55% tax penalty because they see it as an interest-free loan to your business.
VAT and property
Many commercial properties have VAT on the price. If your pension is registered for VAT, it can often reclaim the 20% VAT. If there is already a tenant in the building when you buy it, you might be able to use a rule called TOGC (Transfer of a Going Concern), which means you don’t have to pay VAT upfront at all.
The 2027 Inheritance Tax change
Pensions have always been a great way to pass money to your family without paying inheritance tax (IHT). However, the rules are changing on April 6, 2027. After this date, leftover pension funds, including property, will be part of your estate for tax purposes.
This is a big risk for those who hold their business property in a pension. When you die, your family might have to pay a 40% tax bill within six months. Since a building is hard to sell quickly, they might be forced to sell the property just to pay the tax, which could hurt the business.
Considerations:
- Life Insurance: A life insurance policy may provide cash for the tax bill so the building doesn’t have to be sold.
- New Strategies: Using your pension money while you are alive and keeping other assets that are still tax-free.
- Different Structures: Looking at things like Family Investment Companies.
Growing your portfolio
Our Property Portfolio Review helps you grow by identifying properties that aren’t making enough money and finding ways to refinance and buy more.
The key to success is having the right team: tax experts, mortgage brokers, lawyers, and surveyors who help you stay safe and profitable. As the new tax year starts, now is the time to plan your next move and make sure your money is working as hard as possible.
