Pension contributions
How pension contributions are relieved depends heavily on whether you are a sole trader, a company director, or an employee.
Sole traderConditional
Ltd companyAllowable
EmployeeConditional
Conditions
- For a sole trader, personal pension contributions are not a business expense in the accounts but attract personal tax relief in their own right.
- For a limited company, employer pension contributions for directors and staff are usually an allowable cost if they meet the 'wholly and exclusively' test.
- The annual allowance still caps how much can be paid in with tax relief — £60,000 for 2026/27, or 100% of your earnings if lower, tapered down for high earners and dropping to £10,000 once you have flexibly accessed a pension. The lifetime allowance was abolished on 6 April 2024, so there is no longer any cap on the total size of a pension pot; separate limits now cap only the tax-free lump sums you can take (the Lump Sum Allowance is £268,275 for 2026/27). Confirm current figures on GOV.UK.
Common mistakes
- A sole trader deducting personal pension contributions as a business expense in the accounts.
- Ignoring the annual allowance and other limits.
- Assuming there is still a 'lifetime limit' on the size of a pension — the lifetime allowance was abolished in April 2024. Limits now apply to tax-free lump sums, not to the total pot.
What to keep
- Pension contribution statements.
- For companies, board records of employer contributions.
Real-world example
A company makes an employer pension contribution for its director as part of their remuneration. Provided it is justified as part of a reasonable package, it is generally an allowable cost for the company.
Frequently asked
Why can't a sole trader put pension contributions through the accounts?
A sole trader's personal pension is not a cost of the trade. Instead, relief is given personally, which is a different mechanism from a company employer contribution.
Is there still a lifetime limit on how much I can hold in a pension?
No — the lifetime allowance was abolished from 6 April 2024, so there is no cap on the total size of your pension pot. Separate limits still apply to the tax-free lump sums you can take; the Lump Sum Allowance is £268,275 for 2026/27.
Not sure how this applies to you?
The rules shift with your circumstances. A qualified accountant can confirm what you can claim and handle it for you.
Find an accountantRelated allowances
Source: HMRC guidance · Last checked 2026-06-17
This page is general information based on HMRC published guidance, not tax advice. Status shown is a plain-English summary — your own position can differ. Always check the HMRC source above and speak to a qualified accountant before making a claim.