🧱 A Lego-Style Guide to Pensions for Freelancers & Business Owners

September 8th, 2025

(For anyone who switches between being solo and running the show)

Why bother?
Because pensions are like planting money trees 🌳 - and the taxman will even water them for you. However, you need to plant them correctly, depending on whether you're self-employed or running a company.

🧑‍🎨 STEP 1: Are You Self-Employed (Sole Trader)?

✅ You’re your own boss and get paid from your business profits.

💸 How to pay into your pension:
You make personal contributions from your earnings.

🧮 How much tax relief can you get?
You can claim tax relief on what you pay in, up to:

🚫 What doesn’t count as “relevant earnings”?

👉 So if you’re mostly earning from things like rent or dividends, your pension tax relief could be limited — even if you feel “rich on paper”.

🧑‍💼 STEP 2: Are You a Limited Company Director?

✅ You pay yourself a mix of salary and dividends, and you run your business through a limited company.

💸 How to pay into your pension:
Get your company to pay in as an employer contribution.

🎯 Why this is clever:

🛑 Don’t pay from your own pocket if most of your income is dividends — you’ll miss out on tax relief.

🚦 STEP 3: Know Your Limits (So You Don’t Get a Nasty Surprise)

🧮 Limit 1: Relevant Earnings (For personal contributions)

📆 Limit 2: Annual Allowance

⏳ Limit 3: Lifetime Allowance

🧱 STEP 4: How Do You Actually Get Tax Relief?

There are two main ways you get tax relief on your pension payments:

1. Relief at Source

2. Net Pay

Bottom line:
Most freelancers and company directors using personal pensions will be using relief at source.

🧱 STEP 5: What Should You Do?

Since many people flip between being self-employed and running a limited company, just follow this simple rule:

👉 When you're self-employed:
Pay into your pension personally – you’ll get tax relief based on your profits.

👉 When you're running your own limited company:
Get your company to pay the pension for you – it saves on corporation tax and gives more flexibility.

Switching roles?
Just switch the way you contribute. That way, you always get the best tax relief for your situation.

🎁 Final Handy Hints