There are around 4.5 million self-employed people in the UK, accounting for 15% of the UK workforce. Yet just 31% of self-employed people are saving into a pension. (Source: IPSE)
One big attraction of being self-employed is you don’t have a boss. But, in terms of pensions, this can be a disadvantage.
All employers now have to provide a workplace pension scheme for their eligible employees and pay into it. This boosts the amount their employees are saving towards retirement.
If you’re self-employed, you won’t have an employer adding money to your pension in this way.
But there are still some tax breaks it’s important to not miss out on. For example, you’ll get tax relief on your contributions – up to the lower of your annual earnings or £40,000 a year.
This means if you’re a basic-rate taxpayer, for every £100 you pay into your pension, the government will add an extra £25.
If you pay tax at the higher rate of 40% in England, Wales or Northern Ireland – you can claim back a further £25 through your tax return for every £100 you pay into your pension.
In Scotland, you can claim an extra £1.58 for every £100 paid if you pay tax at the Scottish Intermediate Rate of 21%. A and a further £26.58 if you pay tax at the Scottish Higher Rate of 41%.
Your business might also be able to contribute to your pension.