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.
- Annual and lifetime limits and tax relief rules apply — confirm the current allowances 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.
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.
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 2026-03-01
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.