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

Anna | Warwickshire| 11/06/2019 | 0

  • Private Pension

Anna's question in full

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!

Danny Cox's Response

In short...

No.

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.

 

You may find these pages helpful:

Annoyed Self-employed - Flying solo in business is thrilling. But the twists, turns and bureaucracy can be tricky to navigate.

Private Pensions - Free money from the Government (hallelujah!)

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Danny Cox

Danny has years of experience in personal finance and helping people make the most of their money. Amongst his awards is the coveted Money Management Financial Planner of the year and he is one of only 1% of advisers who are qualified as both Chartered and Certified Financial Planner.

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