A pension is a tax efficient way to save for your future. There are different ways you can take advantage of these benefits, depending on your circumstances.
Your pension contributions are not a business cost and so can’t be classified as a tax-deductible expense in the self-employed section of your tax return. But they should qualify for income tax relief, and so you should add your personal pension contributions to the separate ‘tax reliefs’ section of your self-assessment tax return.
You are eligible for a savings boost on your contributions. Basic rate taxpayers will get £25 extra paid in by the government for every £100 paid into your pension. If you’re a higher or additional rate taxpayer, then you can claim additional tax relief in your self-assessment.
If you are the director of your own limited business you can pay into your pension by making contributions through your company. Paying into your pension this way means that these employer contributions will be offset as a business expense and are therefore not eligible to pay corporation tax. This means that less corporation tax will be deducted from your total company's earnings. Because you have not paid corporation tax on these business contributions, however, your contributions will not receive the government's 25% tax top-up contribution. You’ll need to consider which is the best approach for your circumstances.