Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How to save for retirement if you are self-employed

In the UK there are over 5 million self-employed people, however only 31% of them save into a pension, compared with 84% of employees eligible for a workplace pension*.

Some self-employed people believe that their business will be their pension and that they will sell it when they retire. However, there are many issues with this plan. For example, the business may not be as successful as the owner had hoped and therefore might not sell for as much money as planned which will leave the business owner with an insufficient income when they come to retire.

Many people like the flexibility that being self-employed offered and they enjoy being their own boss. However, when it comes to pensions, being self-employed can be a disadvantage. If you are employed, all employers have to provide a workplace pension scheme for eligible employees and pay into it each month. The increases the amount that their employees are saving towards retirement. The employee can also pay into the scheme through payroll. If you are self-employed then you will not have the advantage of your employer contributing to your pension and you will have to fund the whole amount yourself.

Take advantage of pension tax relief

Despite missing out on auto-enrolment pensions through an employer, self-employed individuals can still take advantage of tax relief on pension contributions.

If you are a basic-rate taxpayer then the government will automatically top up your pension contribution by 20%. For example, if you top up your pension by £100 then the government will automatically add an extra £25 to your pension.

If you are a higher rate taxpayer then you can claim 40% tax relief through your annual tax return. The same applies to additional rate taxpayers with claiming 45% tax relief on pension contributions.

Even if you are approaching retirement age, it is not too late to start saving into your pension. If you are a UK resident, you can benefit from pension tax relief until the age of 75.

Find out more about retirement planning

Speak to a Financial Advisor

Contribute to your pension through your business

Another tax-efficient way to contribute to your pension is through your limited company. A financial adviser at Four Wealth Management can talk you through your options.

Book a no-obligation meeting to discuss your options

Employer pension contributions are classed as an allowable business expense which means that a limited company receives tax relief against corporation tax which could save the company up to 25%.

Employers also do not have to pay National Insurance on their employee’s pension contributions. In the 2021/22 tax year the National Insurance rate is 13.8% so this combined with the 25% corporation tax savings means that the business will be saving up to 38.8% by paying directly into your pension pot.

Make the most of your pension pot

A pension is the most tax-efficient way to save for your future. The earlier that you start to contribute to your pension then the more time your pension pot has to potentially grow over time. Even if you only contribute a small amount per month, you will still benefit from the tax relief top up.

Get financial advice on your pension

There are many different pension schemes, all of which have pros and cons.

There are also countless different investment options once you have chosen a pension scheme. It can be hard to work out which option is best for your own circumstances.

At Four Wealth Management, we offer a no-obligation meeting with a financial adviser. They can work with you to cerate a pension pot that is invested in line with your aims and goals. If you have old pensions elsewhere, they can also help you to track these down and work out what you have already saved for your retirement.

Book online now or call us on 0117 973 0500.


*Aviva, ‘Pensions for the self employed’, 2020

The value of a pension with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

The Partner together with St. James's Place Wealth Management plc are the data controllers of any personal data you provide to us. For further information on our uses of your personal data, please see the Partner's Privacy Policy or the St. James's Place Privacy Policy.

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How to save for retirement if you are self-employed
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