How much can a self-employed person contribute to a pension in 2026/27?

Full answer

Pension saving for the self-employed is just as tax-efficient as for employees, but requires more active management since there is no employer automatically enrolling you or contributing on your behalf. **Annual contribution limit** The Annual Allowance for 2026/27 is **£60,000**. However, you can only contribute up to **100% of your net relevant earnings** in the tax year -- so if your profits are £35,000, your maximum contribution is £35,000. Net relevant earnings for a sole trader = trading profit after deducting Class 4 NI but before other personal expenses. **Tax relief on contributions** When you pay into a personal pension or SIPP, basic rate (20%) tax relief is added automatically by the pension provider: - You pay £8,000; the provider claims £2,000 from HMRC; total contribution = £10,000 - If you are a higher-rate taxpayer, claim the additional 20% (total 40%) through Self Assessment - Additional-rate taxpayers claim 45% total relief **Carry forward** If you have been a pension member in the past three tax years and did not use your full Annual Allowance, you can carry forward unused allowance: - Up to 3 x £60,000 = £180,000 additional allowance from prior years - Total potential contribution in 2026/27: up to £240,000 (subject to earnings cap) **Money Purchase Annual Allowance (MPAA)** If you have already flexibly accessed a pension (taken flexible drawdown or an uncrystallised funds pension lump sum), your annual allowance on money purchase contributions drops to **£10,000** with no carry forward -- important if you dipped into savings during a quiet period. **SIPP options for the self-employed** A SIPP (Self-Invested Personal Pension) is the most popular vehicle for self-employed pension saving because: - Wide investment choice (funds, shares, property, bonds) - Flexible contribution amounts -- pay when profitable, reduce when not - Full control over investment strategy - Death benefits can be passed to beneficiaries Low-cost SIPP providers include Vanguard, Fidelity, AJ Bell, and Hargreaves Lansdown. **Worked example** Sole trader, profits £50,000 in 2026/27, higher-rate taxpayer: - Maximum contribution: £50,000 (lower of £60,000 Annual Allowance and 100% of earnings) - Pay in £40,000 gross (£32,000 personal + £8,000 basic rate relief added) - Claim further £8,000 via Self Assessment (20% higher rate relief) - Net cost of £40,000 pension contribution: **£24,000**

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