SIPP vs Limited Company vs Personal: The Best Way to Buy a Commercial Unit

There are three common ways to own a commercial unit: in your own name, through a limited company, or inside your pension. The same building, the same rent, the same eventual sale — but the tax treatment differs at every stage: funding the purchase, receiving the rent, selling, and passing the asset on. Here is the comparison in one place, stated factually. Which route fits depends on individual circumstances, and this is a decision to take with an adviser.

The comparison at a glance

Tax point	Personal	Limited company	SIPP
Money used to buy	Post-income-tax savings	Post-corporation-tax profits	Pension funds — contributions attracted tax relief going in
Income tax on rent	Up to 45%	Corporation tax 19–25%; further tax to extract (dividends up to 39.35%)	None
CGT on sale	Up to 24%	Corporation tax on the gain; further tax to extract	None
Inheritance tax	In your estate at 40%	Shares in your estate at 40% (investment companies get no business relief)	Outside the estate; unused pensions due within IHT scope from April 2027
SDLT on purchase	Commercial rates — same for all three	Same	Same
Borrowing	Lender's terms, typically up to 65–75% of value	Same	Capped at 50% of the scheme's net assets
Access to the money	Immediate	Via salary or dividends, taxed	From age 55 (57 from April 2028), under pension rules

Buying personally

The simplest route on paper: no structure, rent on your tax return, full control and immediate access to the money. The costs sit at both ends. The purchase is funded from income that has already been taxed, rent is taxed at your marginal rate — up to 45% — every year, the gain is taxed at up to 24% on sale, and the property sits in your estate for inheritance tax. For a higher-rate taxpayer holding long term, the annual drag on rent is usually the largest number in the comparison.

Buying through a limited company

Companies pay corporation tax — 19% to 25% — on rental profits and on gains, which is lower than higher-rate income tax, and interest on borrowing is generally deductible. Two frictions do the damage:

1. The extraction layer. Profits are only useful personally once paid out — and salary or dividends (up to 39.35% dividend tax) add a second layer on top of the corporation tax already paid. Money kept in the company avoids this but stays in the company.
2. No shelter at the end. The gain is taxed in the company, and the shares still sit in your estate; investment companies do not qualify for business relief from inheritance tax.

A company works differently if it is your trading business buying its own premises — the property then sits behind the trade — but that is an ownership decision with its own trade-offs (a creditor risk the pension route avoids, among others).

Buying through a SIPP

The pension route removes the recurring tax points entirely: no income tax on rent, no capital gains tax on sale, and the purchase is funded with money that attracted tax relief on the way in — including company contributions that were deductible for corporation tax. Where your own business is the tenant, rent is deductible for the company and lands untaxed in the pension.

Renting Your Own Premises From Your Pension →

The constraints are the mirror image: the money is locked until at least age 55 (57 from April 2028); borrowing is capped at 50% of the scheme's assets rather than a commercial loan-to-value; the property must be commercial; and everything runs through a trustee at arm's length. On inheritance: pensions currently sit outside the estate, and under announced reforms unused pension funds are due to come within inheritance tax from April 2027 — a genuine change to weigh, and one for an adviser.

Worked example Illustrative example

A new-build unit at Engine Works Park, Margate — price £359,999, market rent £25,999 p.a., held for ten years:

1. Personally (45% taxpayer): rent after income tax £14,300 p.a. — £143,000 retained over ten years. Sale at an illustrative £430,000 triggers CGT of £16,800.
2. Through a company: rent after 25% corporation tax £19,500 p.a. inside the company — £195,000 over ten years; extracting it as dividends costs a further £76,700. Sale at £430,000 leaves £412,500 in the company after tax on the gain.
3. Through a SIPP: the full £25,999 p.a. — £259,990 over ten years — compounds untaxed in the pension. Sale at £430,000: no tax on the gain.

Same unit, same rent, same buyer — three materially different outcomes, driven entirely by the wrapper.

It is not always either/or

The routes combine. The most common structure among owner-managers is the SIPP owning the unit while the limited company occupies it as tenant — pension-route ownership with the business's rent building the pot. Joint purchases are also possible, including a SIPP buying alongside a company or an individual, each owning a share. The comparison above is about where ownership sits, and ownership can be split.

What the comparison cannot tell you

The table answers "how is each route taxed", not "which is right". That turns on facts outside it: whether you need access to the money before 57, the size of your existing pension pot, your income now versus in retirement, your inheritance position after April 2027, and how much concentration in one asset your circumstances can carry. The full guide covers the pension route end to end.

Buying Commercial Property Through a SIPP: The Complete Guide →

FAQ

Is a SIPP always the most tax-efficient way to buy commercial property?

It carries the fewest tax points — no income tax on rent, no CGT, tax-relieved funding — but the money is locked in the pension until at least 55 (57 from April 2028) and borrowing is capped at 50% of scheme assets. Which route works best depends on individual circumstances.

Can my company and my SIPP buy a property together?

Yes. Joint purchases are permitted — each party owns a share and receives its share of the rent, and the SIPP's share of any gain remains free of capital gains tax.

How does the April 2027 inheritance tax change affect the comparison?

Under announced reforms, unused pension funds are due to come within the scope of inheritance tax from April 2027. Pensions currently sit outside the estate; from that date the IHT advantage over personal and company ownership narrows, and estate planning around pension property is an area where advice is essential.

Can I move a property I already own into my SIPP?

A SIPP can buy a commercial property from you or your company — but it is a sale at market value, with SDLT for the SIPP and potentially capital gains tax for the seller, all at arm's length on an independent valuation. It can also be possible to transfer property in lieu of a cash contribution (an in-specie contribution), with the same taxes applying.