Pension contributions

Pension contributions are not a business expense. You cannot deduct them from your self-employment profits on your tax return. However, you do get tax relief on personal pension contributions. Basic rate relief (20%) is usually added automatically by your pension provider. If you pay higher rate tax, you can claim the extra relief through Self Assessment. The annual allowance for pension contributions is £60,000 (or 100% of your earnings, whichever is lower).

Key thresholds

Annual allowance: £60,000 (or 100% of annual earnings if lower). Basic rate tax relief (20%) added automatically by provider. Higher rate relief (additional 20-25%) claimed via Self Assessment.

Common questions

Can I put my pension contributions through my business accounts?

No. As a sole trader you cannot pay into a pension as a business expense. Contributions come from your personal income after tax. The tax relief comes back through your pension provider and Self Assessment, not through reduced business profits.

Do I get any tax relief on pension contributions as a sole trader?

Yes, but not as a business expense. Your pension provider claims basic rate (20%) relief from HMRC and adds it to your pot. If you pay 40% tax, you claim the additional 20% relief on your Self Assessment return.

How much can I contribute to my pension each year?

Up to £60,000 per tax year, or 100% of your earnings, whichever is lower. This includes the tax relief amount, not just what you personally pay in.

Watch out for

The annual allowance can be lower if you have flexibly accessed your pension or have a high income (the allowance tapers down for very high earners).
Unused annual allowance from the previous three tax years can be carried forward.
If you also have employment income, all pension contributions across all schemes count towards the one annual allowance.

Pension rules are complex. The annual allowance and taper rules can create unexpected tax charges. Take advice if contributing large amounts.

HMRC sources

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief https://www.gov.uk/tax-on-your-private-pension/annual-allowance

Last verified: July 2026 · Tax year 2026/27

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This guidance is for general information only. Tax rules change. Verify with HMRC or a qualified accountant before filing.

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