Small Self-Administered Scheme (SSAS) Explained: A Guide to Buying Commercial Property with Your Pension
Learn how UK business owners can use a SSAS pension to buy commercial property. Our latest guide covers the rules, tax benefits, pros, cons, and process.
For many UK business owners, the premises from which they operate is as vital as the business itself. But what if your pension could own that property, providing significant tax benefits and a powerful boost to your retirement planning? This is achievable through a specialist type of pension scheme known as a Small Self-Administered Scheme (SSAS).
This strategy is one of the most powerful available to company directors, but it's also one of the most complex. At Plouta, we believe in demystifying advanced financial topics to help you make informed decisions that can secure your financial freedom. This guide will explain what a SSAS is, how it can be used to invest in commercial property, the significant tax advantages, the critical rules you must follow, and the major risks involved.
What you will learn in this guide: ⤵
What is a SSAS? A clear definition and how it differs from a more common SIPP.
The Core Strategy: How a SSAS can purchase your business premises.
Significant Tax Benefits: Exploring the advantages of holding property within a pension.
HMRC's Strict Rules: What you can and, crucially, cannot do.
The Process Explained: A step-by-step overview from setup to purchase.
Pros and Cons: A balanced look at the significant benefits and potential pitfalls.
Who This Strategy is For: Identifying the ideal candidates for a SSAS.
What is a Small Self-Administered Scheme (SSAS)?
A SSAS is a type of occupational pension scheme, typically set up by the directors of a limited company for themselves and a small number of other senior employees or family members (usually up to 11 members in total).
The key feature of a SSAS is control. The members are usually also the trustees of the pension scheme, meaning they have a high degree of control over the investment decisions. While similar to a Self-Invested Personal Pension (SIPP) in that it allows a wide range of investments, a SSAS has some unique features, most notably its ability to loan money to the sponsoring employer and to be established as a single trust for multiple members.
Think of it as a small, private pension fund run by you and your fellow directors, governed by strict HMRC rules.
The Core Strategy: Using Your SSAS to Buy Commercial Property
The most common and compelling use for a SSAS is to purchase commercial property. This often means buying the building from which your own limited company operates.
How it works:
Setup: The limited company establishes a SSAS, and the directors become members and trustees.
Funding: Members transfer their existing personal and workplace pensions into the SSAS, consolidating their funds into one pot. The company can also make contributions.
Property Purchase: The SSAS uses the combined funds to buy a commercial property (e.g., an office, factory, warehouse, or surgery) on the open market. This can even be the property currently owned by a director or a third party, from which the business trades.
Lease Agreement: The SSAS, as the new owner of the property, must then create a formal lease agreement and charge the business (the sponsoring employer) a commercial market-rate rent to occupy the premises.
Rental Income: The business pays this rent directly into the SSAS. This rental income is a business expense for the company but grows tax-free inside the pension.
Essentially, the money your business was paying to an external landlord now goes directly into your own pension fund, building your retirement wealth in a highly tax-efficient way.
The Powerful Tax Benefits of Using a SSAS for Property
This strategy unlocks several layers of tax efficiency:
Tax Relief on Contributions: Any contributions the company makes into the SSAS are typically treated as an allowable business expense, reducing the company's Corporation Tax bill. Personal contributions also benefit from tax relief.
Tax-Free Rental Income: The rent paid by the business into the SSAS is received completely free of income tax within the pension.
No Capital Gains Tax (CGT) on Sale: When the SSAS eventually sells the property, any growth in its value is completely free from Capital Gains Tax. This is a huge advantage compared to owning the property personally or within the company.
IHT Efficiency: Like other pensions, the SSAS fund (including the property) typically sits outside of your estate for Inheritance Tax purposes, making it a very efficient way to pass wealth down through generations.
Business Cash Flow: It can be a way to unlock cash for the business. If a director personally owns the property, the SSAS can buy it from them, releasing the cash value to the director personally (though this would likely trigger a personal Capital Gains Tax liability for the director).
HMRC's Strict Rules: What You Can and Cannot Do
This strategy only works if you follow HMRC's rules to the letter. Any breaches can result in significant tax penalties.
Commercial Property Only: The SSAS can only buy commercial property. This includes offices, shops, industrial units, warehouses, factories, and farmland. It cannot buy residential property (like a house or flat). Mixed-use properties are complex and require specialist advice.
"Connected Party" Transactions: You can buy the property from a "connected party" (like a director or their family), but the transaction must be at a genuine market value. An independent valuation from a RICS-qualified surveyor is essential to prove this.
Lease at Market Rate: The lease agreement between the SSAS (as landlord) and the business (as tenant) must be formal and legally binding, with the rent set at a commercial market rate. Again, this must be independently verified.
No Member Benefits: You cannot live in or get personal use from the property owned by the SSAS.
Borrowing is Allowed (but limited): A SSAS can borrow money (e.g., take out a commercial mortgage) to help fund a property purchase, but the amount is limited to a maximum of 50% of the scheme's net asset value. For example, if the SSAS has £400,000 in funds, it can borrow up to £200,000, giving it £600,000 of purchasing power.
The Process Explained: A Step-by-Step Overview
Seek Professional Advice: This is not a DIY strategy. You will need a regulated financial adviser who specialises in SSASs, as well as a specialist SSAS administrator/practitioner.
Establish the SSAS Trust: Your company formally sets up the pension scheme, with directors appointed as members and trustees.
Transfer Existing Pensions: Members consolidate their existing pension pots into the new SSAS.
Identify the Property & Conduct Due Diligence: The property is identified, and independent valuations (for both purchase price and rental income) are obtained.
Arrange Finance (if borrowing): The SSAS trustees apply for a commercial mortgage if needed.
Legal Work: Solicitors (ideally experienced in pension property transactions) handle the conveyancing.
Purchase Completion: The SSAS buys the property.
Lease Finalisation: A formal lease is put in place between the SSAS and the business tenant.
Ongoing Management: The trustees are responsible for managing the property (or appointing an agent), ensuring rent is paid, and meeting all HMRC reporting requirements.
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Who Is This Strategy For?
A SSAS is a niche product designed for a specific group of people:
Directors of established, profitable limited companies.
Individuals or groups of directors with significant existing pension funds that can be consolidated.
Business owners who want to buy their own trading premises or who already own them personally and wish to sell them to their pension.
Those who are comfortable with the responsibilities and complexities of being a pension trustee and a commercial landlord.
Investors who understand and accept the high concentration risk of holding a single large asset.
This is not suitable for the average employee, sole traders without a limited company, or those with smaller pension pots.
| Element of the Case Study | Details & Figures |
|---|---|
| The Business | Innovate Engineering Ltd – a successful, profitable UK limited company. |
| The Directors | Sarah (50) and Tom (52). |
| The Goal | To use their pensions to buy their business premises, currently rented for £35,000/year. |
| The Property | Their existing workshop and office space, on the market for £600,000. |
| Step 1: Funding the SSAS | Sarah transfers £250,000 and Tom transfers £200,000 from their existing pensions. Total SSAS Value: £450,000 |
| Step 2: Arranging Finance | The SSAS needs to borrow £150,000 (£600k - £450k). This is within the 50% borrowing limit of £225,000 (50% of £450k). A commercial mortgage is approved. |
| Step 3: The Purchase | The SSAS purchases the property for £600,000 using the combined pension funds and the mortgage. The SSAS is now the legal owner and landlord. |
| Step 4: The Lease | A formal lease is created. Innovate Engineering Ltd (the tenant) pays the SSAS (the landlord) a market-rate rent of £35,000 per year. |
| The Powerful Outcome |
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This case study is a simplified illustration. Real-world scenarios require detailed financial and legal advice to manage the complexities and risks involved.
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Key Takeaways: Using a SSAS to Buy Commercial Property
A Pension That Buys Property: A Small Self-Administered Scheme (SSAS) is a specialist pension that allows business owners to use their collective pension funds to purchase commercial property, often the premises their own company operates from.
Significant Tax Advantages: This is the main appeal. Rental income paid by the business to the pension is received tax-free, and any growth in the property's value is exempt from Capital Gains Tax (CGT) when sold. It's also highly efficient for Inheritance Tax (IHT) planning.
Commercial Property Only: You can only buy commercial property (e.g., offices, factories, shops). Using a pension to buy residential property is strictly forbidden by HMRC.
High Risk Due to Lack of Diversification: This is the single biggest risk. Holding one large property can mean your entire retirement fund is concentrated in a single, illiquid asset, which is a very high-risk strategy.
Strict HMRC Rules Apply: All transactions, such as the purchase price and the rent charged to your business, must be at a genuine market rate, verified independently. Borrowing is limited to 50% of the scheme's net value.
Not a DIY Strategy: A SSAS is complex and expensive to set up and run. It requires a team of professional advisers, including a financial adviser, a specialist SSAS administrator, and solicitors.
A Niche Product for Company Directors: This strategy is designed specifically for directors of profitable limited companies with substantial pension funds; it is not a suitable option for the average saver.
Conclusion: A Powerful Tool for the Right Business
Using a SSAS to buy a commercial property can be an exceptionally powerful financial planning strategy for business owners in the UK. It offers unparalleled tax benefits and can create a virtuous circle, where your business's success directly fuels your personal retirement wealth in a highly efficient way.
However, this is not a simple decision. The benefits come with significant responsibilities, risks, and administrative complexity. The lack of diversification and liquidity are major factors that must be carefully considered.
This strategy should never be undertaken without professional, regulated advice from a financial adviser and a SSAS practitioner. For the right company and the right directors, it can be the key to unlocking a new level of financial control and a more secure retirement. For the wrong ones, it can be a costly mistake.
To find a SSAS provider on your own, you can search the AMPS directoryOpens in a new window (Association of Member-Directed Pension Schemes) for ‘SSAS administrators’ and ‘SSAS professional trustees’.
You’ll also usually need to register:
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Disclaimer: This guide provides general information about using a SSAS to purchase commercial property and is for informational and educational purposes only. It is based on rules and information known as of June 2025. Tax and pension laws are complex and subject to change. This does not constitute financial or legal advice. A SSAS is a complex financial product with significant risks. You must seek independent, professional, and regulated financial advice tailored to your specific business and personal circumstances before considering this strategy.
