Pension Property and the 2027 IHT Deadline: Time to Take Stock

For years, holding commercial property inside a Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS) has been one of the most tax-efficient strategies available to business owners and investors. Assets grew free of capital gains tax, rental income was sheltered from income tax and, crucially, the fund sat outside the member's estate for inheritance tax (IHT) purposes.

That last advantage is about to change.

From April 2027, unused pension funds are expected to fall within the scope of inheritance tax for the first time. Trustees and beneficiaries who have never had to think about IHT in the context of their pension now face a serious planning challenge. Dealing with commercial property within your portfolio makes that challenge harder, not easier.

The problem is liquidity. An HMRC IHT liability falls due within six months of the date of death. Cash can be moved quickly; a commercial property cannot. A retail unit, an industrial estate or an office building may take months — sometimes years — to sell at a fair price, particularly in a slow market or where a lease needs to be surrendered or assigned. A forced sale to meet a tax deadline rarely produces the best price.

This means trustees and beneficiaries should be reviewing their pension property portfolios now, well before 2027.

The questions to ask include:

• Which properties are most marketable and could be sold at short notice if needed?
• Which are core long-term holdings that the family or business genuinely intends to keep?
• Are there leases being granted or renewed within a pension portfolio which may need to exclude security of tenure?
• Is there enough liquid cash within the pension to cover a potential IHT charge without having to sell anything at all?

Planning also needs to look at the whole estate picture. The pension's IHT exposure does not sit in isolation — it interacts with property, investments and business assets held personally.

Early advice from our commercial property solicitors, acting with input from your financial advisor will be key to successful planning.

The 2027 deadline is closer than it looks, and illiquid assets take time to move.