What if you could strategically extract money from your company, increase your tax reliefs and safeguard wealth from creditors as well as inheritance tax, all while choosing what to invest in, even your own business premises? 

Well, a Self-Invested Personal Pension (SIPP) offers this and much more. In this article we explain how directors and entrepreneurs can start enjoying a lot of these benefits, not decades down the road, but right now.

We’ll break down what a SIPP is, the 10 key benefits and the SIPP rules. We’ll also compare SIPP providers and cover what makes these pension pots particularly attractive for business owners. Let’s begin.
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What is a SIPP?

So, what are SIPPs? A Self-Invested Personal Pension or SIPP is a UK personal pension that gives you a great degree of control over how your retirement savings are invested. Importantly, for UK business owners, a SIPP is not only a powerful tool for retirement planning but also for tax efficiency. This differs from a workplace pension, we have an article comparing SIPPs vs workplace pensions.
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How does a SIPP work?

In a nutshell, you would:

1. Open a SIPP by choosing a provider (we compare them below) and registering for an account.
2. Contribute to your account by paying in personally or via your company (we discuss the tax advantages of each method below).
3. Invest your contributions by choosing from a range of investment options with your provider (growth is tax-free as we discuss below).
4. Access your capital from age 55/57 (25% tax-free with the rest taxed as income, more details below).
5. Pass on to your heirs (There are tax-efficient inheritance options as we cover below).

10 Benefits of a SIPP

Contributing to a SIPP offers significant tax and financial planning advantages, particularly for directors of UK limited companies. This table shows some of the key benefits which we discuss below:
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1. Corporation Tax Relief

Employer contributions made by your company into your SIPP are classed as an allowable business expense. This is the first of many SIPP tax benefits and means that employer contributions to a SIPP reduce your company’s Corporation Tax bill (19%–25% depending on profit levels).

For example, if your company contributes £20,000 into your SIPP, that could save your company between £3,800 and £5,000 in Corporation Tax.
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2. No National Insurance Contributions (NICs)

Unlike if you earn a salary or bonuses, employer pension contributions aren’t subject to employee or employer NICs. Employer NICs have increased sharply for 2025/26, making SIPPs even more advantageous here. By contributing an amount to your SIPP instead of drawing it as a salary, this could save you:

• 15% of employer NICs on any salaries above the Class 1 National Insurance Secondary Threshold (£5,000 per annum). 
• Up to 2% of employee NICs depending on the level of income.

Looking at the employer NICs, here’s an example. If you earn a tax-efficient directors salary of £12,570, then £7,570 of this is already above the threshold. Let’s say you wanted to extract an additional £10,000 in the year for investment purposes. In the form of salary, your company would owe £1,500 of employer NICs on that but if, instead, you contributed this directly to your SIPP, there’d be no NICs due at all.
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3. Personal Tax Efficiency

Provided you stay within the annual allowance of £60,000, you can receive pension contributions from your company without paying Income Tax.

For example, let’s say that after earning a tax-efficient salary of £12,570, you wanted to extract an additional £10,000 in the year for investment purposes. If you extracted this as a:

• Salary - There would be £2,000 of personal income tax (at 20%) and £600 of Class 4 NICs (at 6%) due
• Dividend - There would be £875 of tax (at 8.75%) due
• SIPP Contribution - There would be no income tax or NICs due

4. Investment Flexibility

You can choose from a wide range of SIPP investment options. This depends on your provider but often includes shares, ETFs, bonds and more. In addition, you can use your funds to purchase commercial property as we cover in the next point.

This flexibility allows you to easily align investments with your personal goals and risk appetite.
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5. Using a SIPP to Buy Commercial Property

Uniquely, a SIPP also allows you to use your funds to buy commercial property, including your own business premises. This has a multitude of benefits:

• This provides a traditional option for the risk averse investor while allowing capital growth should the property appreciate. You can purchase in full or partly with a mortgage (up to 50% of your SIPP’s value).
• Your business can rent the property from your pension (at market rate rent). This may allow you to further your business and is an allowable expense you can use against corporation tax. 
• Unlike the income tax that would be due on standard rent, the rent paid into your SIPP is tax-free and builds your pot.
• Since your business does not own the property, this can be used as a method of safeguarding some of the business’s wealth.
• Since the property is within your SIPP, when you sell it, there will be no Capital Gains Tax (CGT) and it will receive inheritance tax benefits, both of which we will discuss below.
• The SIPP can also be VAT registered if the property is.

6. Asset Protection

For those seeking additional wealth protection, you’ll like the fact that assets held in your SIPP are protected from creditors. This makes SIPPs a suitable tool for storing long-term wealth while safeguarding it against potential financial troubles with your business.
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7. Inheritance Tax (IHT) Benefits

The first of many SIPP death benefits is that the funds you build up within your SIPP are outside your estate for IHT purposes. Depending on how long you live, the following rules apply. If you die:

• Before age 75, your beneficiaries can inherit the pension tax-free.
• After age 75, there is still no IHT, however withdrawals made by your beneficiaries face income tax at the beneficiary’s marginal rate (20%, 40%, or 45%). They may take this as lump sums, income over time or leave it invested and draw on it later.

8. Compound Growth in a Tax-Free Wrapper

Do you pay tax on a SIPP? No, investments in your SIPP can grow tax-free. This means you don’t pay tax on any dividends you earn from investments, nor do you pay CGT on any capital growth when selling investments.

For example, let’s say you earn a total of £50,270 a year. If, on top of that, you have a gain of £100,000 from selling investments:

• In a SIPP - There is no CGT payable
• In a personal investment account - There is £21,000 of CGT payable (at 24%), after your £3,000 annual (CGT) allowance.

9. Retirement Flexibility

From age 55 (rising to 57 in 2028), you can access your SIPP funds by:

• Taking 25% tax-free as a lump sum.
• Drawing down the rest as you wish with withdrawals facing personal income tax at your marginal rate (20%, 40%, or 45%).

10. Personal Tax Relief

To encourage saving for retirement, HMRC also provides 20% tax relief (basic rate) on any personal SIPP contribution you choose to make. Essentially, they are giving you back the tax you’ve already paid on the money you are personally putting away for retirement. Higher and additional rate tax payers can claim back additional amounts via self-aseessment.
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SIPP Tax Relief Example 

For example, if, as a basic rate tax payer (20%), you contribute £10,000 of your own money to your SIPP, then this is treated as 80% of a gross contribution. HMRC calculates that your total contribution should be £10,000/0.80 = £12,500 and adds £2,500 (which is 20% of the gross amount). Effectively you make a £12,500 gross contribution at a net cost of £10,000. 

If you’re a higher rate tax payer (40%), HMRC adds the 20% (as above), however you can then also claim the difference back via a self-assessment tax return. Effectively, you gain £2,500 (20%) directly into your SIPP and a 20% tax rebate, making for a total of 40% tax relief on the £10,000 contributed. The same applies for additional rate tax payers but who will receive a 25% rebate, totalling 45%.
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SIPP Rules

This table summarizes some of the SIPP pension rules you need to be aware of. We explain these in detail below:
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SIPP Opening Rules

Who can open a SIPP? Anyone under the SIPP age limit of 75 can open and contribute to a SIPP. There is no need to be employed, therefore self-employed, directors and even children (via a parent) can have one.
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SIPP Contribution Rules

Both you and your company (or the company you work for) can contribute to your SIPP:
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Personal Contributions to SIPP:

• You can contribute up to 100% of your earnings (salary/self-employment income) but not more than the annual allowance.
• The annual SIPP allowance is generally £60,000 per tax year. In the case that your adjusted income, including pension contributions, exceeds £260,000, this maximum SIPP contribution allowance will likely be tapered, potentially to as little as £10,000. 
• If you exceed the allowance, you may face a tax charge unless you are carrying forward unused allowance from previous years, which we cover below.

Employer Contributions to SIPP:

• Contributions may exceed your salary while continuing to benefit from Corporation Tax relief.
• Contributions still count toward the £60,000 annual allowance.
• Contributions are subject to the “wholly and exclusively” test. This means contributions should be for genuine business reasons rather than pure personal gain. For example, contributions would likely not be allowed if they are made for an employee who is not active in the business and doesn’t earn a salary where the contributions are purely to reduce profits or avoid tax with no link to commercial purpose.

Carry Forward

Unlike with most tax-efficient vehicles such as ISAs, with a SIPP, you can carry forward unused allowances from previous years, up to a maximum of the past 3 tax years.
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Personal SIPP Contribution Tax Relief

On any contributions you personally make, HMRC automatically adds 20% (basic rate) tax relief. Higher rate (40%) or additional rate (45%) taxpayers can claim the difference, 20% or 25% respectively, via self-assessment.
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Non-Earners (incl. children):

Under UK SIPP rules, even if you have no income, you can contribute up to £3,600 gross per year. Effectively, this means you can contribute £2,880 of your own money and HMRC will add £720 in basic-rate tax relief (20%) directly into your SIPP for a total of £3,600. These SIPP contribution limits also apply for children under 18 with a SIPP managed by a parent or guardian.
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SIPP Investment Rules

There are a range of SIPP qualifying investments. You can invest in:

• Stocks and shares (UK and global)
• Funds (OEICs, unit trusts, ETFs)
• Gilts and bonds
• Commercial property
• Gold (investment grade bullion held at approved vault)\
• Cash
• HMRC-approved peer-to-peer (P2P) lending platforms

That said, you cannot invest in:

• Residential property
• Tangible moveable property (Art, antiques, jewellery, wine etc.)
• Unapproved lending (Loans to yourself, your business or family members or any unapproved P2P platforms)

SIPP Withdrawal Rules

When it comes to accessing your funds and the SIPP drawdown rules:

• You can begin withdrawing from the SIPP retirement age of 55 (this is rising to 57 in 2028).
• 25% of your pot is tax-free. This is your tax-free Pension Commencement Lump Sum (PCLS) and is limited to 25% of your pension value, up to a maximum of the Lump Sum Allowance (LSA). For 2025/26, the LSA is £268,275. 
• The rest of your withdrawals face income tax at your marginal rate.
• You may access your SIPP by taking a lump sum up front (UFPLS - Uncrystallised Funds Pension Lump Sum), drawing it down over time or purchasing an annuity.

SIPP Inheritance Tax Rules

While SIPPs are generally not subject to Inheritance Tax (IHT), the overall tax treatment of your SIPP depends on when you die:

• If you die before age 75 - Your beneficiaries can inherit your SIPP tax-free provided that payment occurs within 2 years of death and it’s within  Lump Sum Death Benefits Allowance (LSDBA). For 2025/26 this limit is £1,073,100. 
• If you die after 75 - While there is still no IHT, withdrawals made by your beneficiaries face income tax at their marginal rates of tax (20%, 40%, or 45%). They may take this as lump sums, begin to draw it down or leave it invested.

Choosing the Best SIPP Provider

In this SIPP comparison, we’ve included 3 providers based on whether you want:

• The lowest possible costs while sticking to ETFs
• The highest degree of control and choice of investment options
• The most hands-off option that’s managed for you

Invest Engine SIPP

This platform is for the DIY investor who wants to keep costs as low as possible while diversifying through ETFs (Exchange Traded Funds).
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Invest Engine charges 0 fees for their SIPP account and you can choose investments commission-free. While this is, by far, the cheapest SIPP here, the platform focuses solely on ETFs. While the platform is free, individual ETFs may charge a fee of their own.

This low cost SIPP has over 820 ETFs to choose from and a handy Savings Plan feature if you wish to automate your investing.

Go to the InvestEngine SIPP

This is our affiliate link. We may earn a commission if a user signs up. InvestEngine did not request to be included in this article and this is written in our own words.
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interactive investor (ii) SIPP

The ii SIPP is for the DIY investor who prefers flat fees and wants a range of tools and investment options. You can purchase individual stocks, ETFs, funds, investment trusts, bonds, gilts and more.
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ii is unique in that they charge a flat fee unlike competitors who charge fees as a percentage of your portfolio. Since flat fees become more and more cost effective as your portfolio grows, this is well suited to SIPPs. 

You can start an ii SIPP for a flat fee of £5.99 a month with the Pension Essentials plan. Once the value of your portfolio surpasses £50,000, you will move onto the Pension Builder plan at £12.99 a month. UK and US trades cost £3.99.

Go to the interactive investor SIPP
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Wealthify SIPP

This platform is for the passive investor who wants a hands-off, fully managed SIPP.
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With Wealthify, you choose either an Original or Ethical plan and then select a risk level, from Cautious to Adventurous. Their experts then select a tailored mix of investments to create your Personal Pension Plan, monitoring and adjusting over time to keep your pension on track.

The annual account charges for a Wealthify SIPP depend on the value of your portfolio. This is 0.6% of your portfolio value for balances up to £100,000, dropping to 0.3% for any portion over £100,000. As Wealthify puts your money to work through various investments, these have charges of their own. Per year, these average around 0.16% for Original Plans and 0.7% for Ethical Plans.

Go to the Wealthify SIPP
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Last Word

We hope this has shown that a SIPP isn’t just another pension option — it’s a powerful financial tool that UK business owners and directors can leverage for an edge. Whether you’re looking to strategically move wealth, safeguard your assets, harness tax reliefs or broaden the selection of what you can invest in, including your own commercial property, a UK SIPP might be just what you’re looking for.

If you’re a client and have any questions about starting your own SIPP, please reach out to your accountant. If you aren’t a client yet and would like to work with us, please get in touch with us today.
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When investing, your capital is at risk. Tax treatment depends on your personal circumstances, which may change. The value of your investments may go down as well as up. You may not get back all the money that you invest. This communication is not intended to be a personal recommendation. If you are unsure about the suitability of an investment product or service, you should seek advice from an authorised financial advisor.