Summary of main tax reliefs on person pensions for small business owners

1. Simon Peters FCCA
Peters Associates Ltd
Certified Accountants
simon@petersassociates.co.uk

2. Sole traders & partnerships
 Payments into registered personal pension scheme
 Treated as paid net of 20% tax
 Additional higher rate relief available via tax return
Example – higher rate tax payer
 Payment of £800
 Pension scheme claims £200
 Reduce tax liability by £200
 So effectively paying £600, for £1,000 pension
contribution (40% gross relief)

3. Limits to your contributions
Maximum (gross) restricted to lower of –
 Annual relevant earnings (excludes dividend, interest,
rent)
 £50,000 (£40,000 2014) though can use unused relief
from 3 previous years
 Lifetime allowance £1.5 million (£1.25million 2014)
If no earnings can pay up to £3,600 (gross)

4. Company directors – personal pension
payment options
Type of payment Employee
contribution
Employer
contribution
Personal
contribution
National
insurance payable
Yes No No
How paid Net Gross Net
Limited to
earnings
Yes No Yes
Tax relief to
person or
company
Person/company Company Person
Tax efficient No Yes Yes – but limited
by low earning