Do pension contributions count as a Business Expense for self-employed sole traders?

11 June 2019

Question by Anna

I am a self-employed sole trader. If I was to open a Personal Pension, as I am self-employed, would my pension contributions count as a Business Expense, on my Excel spreadsheet of expenses, incurred in running a small business? I would just like to know a Yes or No answer please. Many thanks in advance for answering my question!

Answered by Boring Money

In short...

As a sole trader...
If you employ any other members of staff and make contributions to their pensions, that’s a business cost, so you can get tax relief on contributions as a business expense.

However, any contributions you make for yourself are not a business cost, they are personal contributions, so you don’t claim tax relief in the same way.

If you’re a basic rate taxpayer, the tax relief is added automatically by the provider to your contributions. For every £100 you put in, £25 is added.

If you are a 40% taxpayer, you also need to include your total personal pension contributions (including tax relief) on a separate part of your self-assessment form, under Tax Reliefs. This will ensure you get the additional £25 tax relief you would be entitled to.

Hope this helps.

Answered by

Boring Money