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Can a self trader contribute to pension for an employee who is age over 75 and can it be tax deductible as an expense in sole trader business?

15 November 2021

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Question by Keshavji

Can a self trader contribute to pension for an employee who is age over 75 and can it be tax deductible as an expense in sole trader business?


Answered by Laura Ripley

Hi Keshavji

Thanks for getting in touch - that is a great question!

When you're a sole trader all pension contributions count as personal, rather than employer. This can have quite a big impact on how much can be contributed and receive tax relief. However, the pension tax rules are clear on contributions for people over the age of 75 - they will attract no tax relief whether they come from an employer or an individual.

The specifics of this can be found in the Pensions Tax Manual, sections 041000, 043200 and 044100 are all relevant. The legislation that requires this is in Section 188(3)(a) of the Finance Act 2004.

There are some situations where it can be worth making contributions to a pension scheme when over the age of 75, even if you don't receive tax relief. These tend to be very specific circumstances, particularly where inheritance tax is a big issue.

If you are looking for tax efficient ways to make longer-term investments, it is definitely worth looking at Stocks & Shares ISAs as an alternative. Although they do not offer any tax-relief up front for the business or the individual, any investments contained within grow free of income and capital gains taxes, and the money is not taxed when withdrawn.

I hope that helps, and if I can be of any more help just let me know!

Kind Regards

Laura Ripley
Chartered Financial Planner

Answered by

Laura Ripley

Chartered Financial Planner

I am a Chartered Financial Planner and Operations Director of Handford Aitkenhead & Walker, a practice that has been in business for over 40 years. I also hold the Investment Management Certificate and co-manage the investment solutions for our clients.