Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, looks at the tax benefits of saving into a pension for the self-employed:
You need a pension if you want to live comfortably in retirement, but it’s often one of the last things you think about when you are self-employed.
As of December 2022, there were 4.3m self-employed workers in the UK and four out of five of these self-employed people don’t have a pension plan.
Why is it important to have a pension if you’re self-employed?
A pension will maximise the tax benefits Self-employed workers are entitled to all the same tax reliefs on pension contributions as employed people.
You get a tax top-up when you contribute to your retirement pot, at the rate of 20%, 40% or 45%, depending on your tax bracket.
So, for example, every £800 paid in by a basic-rate taxpayer will automatically turn into £1,000.
Higher-rate taxpayers can claim back an additional £200 through a self-assessment form, boosting their return even more.
This means your money can grow tax-free for decades. Self-employed people are estimated to be missing out on £1 billion in pension tax relief every single year.
For pensions and investment advice contact Becky Hammonds on 07969 269677 or email becky@willowfs.co.uk
