Important IHT Changes for SME Owners with Pension‑Held Properties

The government has reported upcoming substantial changes in April 2027 that will significantly impact business owners who hold commercial property within pension schemes – particularly those using SIPPs or SSASs.

Here’s what you need to know.

Background

Until now, it’s been fairly common for SME owners to hold their business premises within a pension. It’s often seen as a smart move – helping to fund retirement while still benefiting the business. The pension receives rental income from the company, and the business gains access to capital that would otherwise be tied up in property. What’s more, on death, the property could usually be passed on free of inheritance tax (IHT).

That’s now about to change.

With UK pension funds holding around £43 billion in commercial property, the impact of this shift could be significant.

So what’s changing?

The government is planning to bring certain unused pension benefits into the scope of inheritance tax. Specifically, from April 2027, assets in a pension that haven’t yet been accessed – including commercial property – could be treated as part of the member’s estate and taxed at up to 40% on death.

This means that for SME owners who’ve placed valuable commercial properties into SIPPs or SSASs, there could be a substantial and unexpected tax bill for their beneficiaries – wiping out one of the key advantages of using a pension to hold business property.

How SMEs might be affected

If your business property is already held inside a SIPP or SSAS, or you’re planning to move into this structure, new inheritance tax (IHT) rules will apply starting in April 2027. These changes could complicate estate planning, especially for SME owners seeking to pass on their businesses or retain family control.

 

Key takeaways:

1. Property in pensions may become IHT-affected
   From April 2027, commercial property within your pension may no longer be exempt from IHT, altering its appeal as a vehicle for intergenerational wealth transfer.
2. Business assets inside pensions may trigger taxation on death
   The new rules could change how such property is treated on your passing, potentially impacting your company’s succession or sale plan.
3. Review current pension‑held property structures early
   Now’s the time to evaluate any property held within pension schemes to understand how these changes may affect company or family continuity strategies.

What business owners should do now

You don’t need to rush and do any immediate changes, but it might be effective to ask your accountant to conduct an early review

• Map out any commercial property currently held in SIPP or SSAS structures.
• Consider how these assets fit into your business, personal, and family planning.
  

• Explore whether transferring these assets outside the pension before April 2027 makes sense.
• Look at how you are best to structure your future pension architecture given evolving fiscal rules?

We can help

As independent accountants working closely with Pareto Financial Planning, it’s vital to keep ahead of these legislative developments. Property held in pensions has been an attractive route to lock in IHT efficiency – but these new rules may shift the strategic calculus.

If you’d like us and Pareto to run through your specific setup or start planning options tailored to your business and family arrangements, feel free to arrange a review session with our in house IHT specialist Nigel Shaw: nigel.shaw@langricks.com