Pension Advice

Can I pay into a pension when I’m self employed?

Pension advice: You should think about setting money aside for your retirement when you’re self employed.

When you pay into a private self employed plan  you will receive tax relief in full against the contributions as long as they are not more than 100% of your earnings and don’t exceed £40,000 a year

If your rate of income tax is the basic rate of 20% your provider will claim this relief for you and add it to your pension pot.  This is known as relief at source.

This means that for every £80 you contribute, your provider will add £20 as tax relief and the total payment into your plan will be £100.

If your rate of tax is above the basic rate you can claim additional relief on top of the relief at source:  20% if you pay tax at the 40% rate and 25% if you pay tax at 45%. You claim this on your self assessment return at the end of the year.

The simplest type of private pension for a self employed person is a stakeholder pension.   All of the big insurance companies provide them, as well as banks and building societies.  They have to abide by certain conditions laid down by government to limit the charges you have to pay and to ensure they are flexible to access.

You can change or stop your contributions in the future if your circumstances change or you stop working.

You can also take a stakeholder pension with you in the future so even if you are working for an employer you can continue contributing to it yourself and ask your employer to make contributions too.

Because there’s a wide range of providers offering stakeholder schemes, you’ll be able to research the best pension for a self employed person.

Triginta can help

The Triginta tax calculator takes account of your pension contributions and deducts the additional relief from the amount you need to set aside for tax.


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