Copy article

Pension IHT rules could create ‘perfect storm’ for business owners with property-owning SIPPs and SSASs

ended 05. September 2026

Business owners who hold their trading premises within a SIPP or SSAS could face a significant new risk when pensions become subject to inheritance tax from April 2027, with unmarried business owners potentially particularly exposed.

The issue could be most acute where the pension owns the premises occupied by the member's own company — perhaps a factory, warehouse, workshop or office — and the business is heavily dependent on its owner.

From 6 April 2027, most unused pension funds and death benefits will be brought within the estate for inheritance tax purposes. Where pension benefits pass to a spouse or civil partner, the normal IHT spouse exemption can apply. Unmarried partners do not benefit from the same exemption.

This could create a serious liquidity problem where much of someone's pension wealth is tied up in their business premises.

Scott Gallacher, Chartered Financial Planner and Director at Rowley Turton, says:

“There is a potential perfect storm here for some business owners, particularly those who aren't married or in a civil partnership.

“Imagine a business owner's SSAS owns the factory from which their company trades. Much of their pension could be tied up in that one property, with their company paying rent into the pension.

“The owner dies and, without them, the business may effectively die too. The rent stops at exactly the wrong moment and the pension is left owning an empty commercial property. Business rates and other property costs can then start eating into whatever cash remains.

“At the same time, the pension could face a substantial inheritance tax liability. For an unmarried owner, there is no spouse or civil partner exemption to potentially shelter benefits passing to their partner.

“If there isn't enough cash available to pay the tax, interest can start accruing while the pension trustees try to find a buyer for the property. That creates pressure to sell quickly, potentially turning what should have been an orderly commercial property sale into something approaching a fire sale.

“What makes this particularly concerning is what happens if the property subsequently sells for substantially less than the value used for inheritance tax.

“HMRC has confirmed that the normal inheritance tax loss-on-sale relief for land will not apply to notional pension property. So the pension could potentially pay inheritance tax based on a property value it never actually realises.

“Nor will notional pension property qualify for the normal facility that allows inheritance tax on certain qualifying assets to be paid by instalments over ten years.

“Put all of that together: the owner dies, the business closes, the rent disappears, property costs start mounting, inheritance tax becomes due, interest potentially accrues and the trustees are under pressure to sell. If they eventually sell at a significant loss, there is no normal IHT loss-on-sale adjustment.

“That is a huge increase in risk for business owners who may have quite legitimately put their trading premises into a SIPP or SSAS many years ago, when the inheritance tax treatment of pensions was very different.

“This isn't a reason for business owners to panic and start taking property out of their pensions. But it is a reason to review these arrangements before April 2027 and ask a very simple question: if I died tomorrow and the business stopped paying rent, where would my famil or my pension find the cash to pay the inheritance tax?

“I would also like the Government to look again at the rules before they take effect. At the very least, there is a strong case for extending appropriate instalment and loss-on-sale protections to genuinely illiquid pension assets.”

Questions for experts

  • Do the new IHT rules fundamentally change the risk of holding owner-occupied commercial property within a SIPP or SSAS?
  • Are unmarried business owners particularly exposed to this problem?
  • Are you reviewing the liquidity of property-owning SIPPs and SSASs before April 2027?
  • Should pension-owned commercial property qualify for IHT loss-on-sale relief?
  • Should an instalment facility be available where the pension contains genuinely illiquid assets?
  • Could these changes make advisers and business owners reconsider holding trading premises within pensions?
  • What practical steps should affected business owners be considering now?

5 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Scott GallacherVerified
Director at Rowley Turton
April 2027 is a potential game changer, especially for unmarried business owners with commercial property in their SIPP or SSAS.

Business owners should now compare pension ownership against alternatives such as personal, company or other structures, taking account not just of income tax and capital gains tax, but also inheritance tax, liquidity and what happens on death.

The answer will differ from case to case, but the days of assuming that ‘property in the pension is best’ may be over.
Copy

Editor
Riz MalikVerified
Independent Financial Adviser at R3 Wealth
A SIPP or a SASS holding property doesn’t mean you shouldn’t review your circumstances in light of changing legislation. The clock is ticking as we approach April 2027, it is not too late to get your ducks in a row.
Copy

Editor
Kate UnderwoodVerified
Founder & Chief People Strategist at Kate Underwood HR and Training
Small business owners are playing dodgeball at the moment, and not the fun kind. We're not throwing anything, we're just stood there dodging. Holiday pay enforcement, a new Acas code, tipping rules, staff monitoring, and now the pension our premises sit in. Four consultations close this month and hardly a small employer will answer one.
The bit that stops me is the unmarried point. Two owners, same factory, same pension, both with a partner of twenty years. One had a wedding, one didn't, and only one family gets stung. In 2026 the tax system still hands out relief on the basis of a ring.
And it lands at the worst possible moment. The owner dies, the business goes with them, the rent stops, and a grieving partner is asked for tax on a building nobody's queuing up to buy.
I'm not a pensions expert, I'm an owner. So ask the question now, while you can. If I died tomorrow and the rent stopped, where does the cash come from?
Copy

Editor
Tony SanchezVerified
Founder at Bridging Loan Directory
The real difficulty is that the tax timetable and the property timetable may be completely different. An inheritance tax liability can arise within months, while selling a factory, warehouse or office—particularly after its occupying business has lost its owner or stopped paying rent—may take considerably longer.

Through Bridging Loan Directory’s reporting, we see how short-term property finance can provide time when an asset cannot be sold immediately. It should not, however, be treated as an automatic answer here. A lender would still need suitable security, the necessary authority to lend to the pension arrangement and a credible route to repayment.

The same event creating the need for liquidity could also weaken the property’s income, value and saleability. That makes an early review of the property, available cash and contingency plans essential, especially for unmarried owners whose partners will not qualify for the spouse exemption.
Copy

Editor
Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
This is not pension reform; it is Labour raiding tomorrow’s family businesses to fund today’s political promises. HMRC forecasts £640m from it in 2027 - 28, while affected estates face around £34,000 more IHT on average. But a factory inside a SIPP or SSAS is not spare cash: it may be the foundation from which a business trades. If the owner dies, rent can stop and tax is due within six months yet notional pension property receives neither normal loss on sale relief nor its own instalment facility. Government could tax a valuation the family never realises and force a sale at the worst moment.

“Unmarried partners are plainly more exposed. A tax system that claims to respect personal choice should not pressure couples into marriage. Genuine pension owned trading premises should receive targeted IHT protection or at minimum deferral until sale, instalments and recalculation using actual proceeds. Owners need to review liquidity, succession, wills, nominations and key person cover now.