Invest pension in property and get a tax break with SIPPS |
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Tue, 26 Jul 2005 16:05
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LONDON: New rules incorporated into pension legislation are expected to give a fillip to the housing sector, a study has found. The rules provide for tax breaks to investors who park their personal pensions in property. The housing market could benefit from investments in excess of 8.5 billion pounds from 2006 with new SIPPs rules, the study revealed.
The rules that come into force from April next year allow Britishers to obtain full tax relief if they invest up to 215,000 pounds in self-invested personal pension (SIPP) plans in residential or commercial property, at home or abroad. So, if a tax payer in the higher brackets buys an apartment for say, 200,000 pounds, it would in actuality cost 120,000 pounds, with the government making up the balance. The rental income and capital gains on the property going back into the SIPP are also tax-free.
There are 140,000 SIPP contracts in existence and this could lead to 52,000 additional pension property transactions at an average value of 195,000 pounds, says the Hargreaves Lansdown survey.
As much as 85 per cent of the respondents to the survey indicated they would be buying property in Britain. It is expected that there could be a 5 per cent rise in housing market transactions, to 8.5 billion pounds.
The survey noted that 79 per cent of SIPP property investors planned to invest in buy-to-let properties, 42 per cent in holiday homes and 14 per cent in their own residences.
The survey was conducted in June and July 2005 and consisted of 614 questionnaires completed by members of the public.
Tom McPhail, head of pensions research for Hargreaves Lansdown, said, "It's the golden combination of property investment and government tax breaks; people want it and they want it now."
Previously only commercial properties were covered under SIPP and the facility has been used mainly by professionals to acquire their firms' buildings.
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