When you’re building a business, pension planning can easily slip down the priority list. Customers, cash flow, tax bills and simply running the business tend to feel much more immediate.
Perhaps you have an old workplace pension that you haven’t contributed to since becoming self-employed, or you’ve set up a workplace pension for your employees but haven’t given much thought to your own retirement.
Whatever your situation, you don’t necessarily need to wait until the business is generating substantial profits before starting. An affordable regular contribution can establish the habit, with the option to review and increase it as your business develops.
Sole Trader or Limited Company? It Makes a Difference
How you contribute to a pension will depend partly on how your business is structured.
If you’re self-employed as a sole trader, you can make personal contributions into a registered pension. Depending on your circumstances, you can receive tax relief on those contributions, subject to the relevant limits.
If you operate through a limited company, you have another option. The company can potentially make employer pension contributions directly into your pension. These are treated differently from personal contributions and can potentially qualify as a business expense for Corporation Tax purposes, subject to HMRC’s rules.
If you’re a company director, your personal pension planning is also separate from any workplace pension responsibilities you have towards employees. The rules around automatic enrolment for directors depend on the company’s circumstances, including whether you employ other people and whether directors have employment contracts. The Pensions Regulator explains the rules for company directors here.
Start With What You Can Afford
Pension planning doesn’t have to begin with a large contribution. Starting with an amount you or the business can comfortably afford can make saving for retirement part of your regular financial planning.
For example, £200 a month would mean £2,400 going into your pension over a full year. That’s simply an illustration rather than a recommended amount, what’s appropriate will depend on your personal circumstances and the finances of your business.
As the business grows, you can review your contributions. Limited-company directors may also want to consider whether additional employer contributions are appropriate following a particularly profitable year.
Keep an Eye on Pension Allowances
There are limits and tax rules to consider when contributing to a pension.
For 2026/27, the standard pension annual allowance is £60,000, although a lower allowance can apply in certain circumstances, including for some higher earners and people who have flexibly accessed their pension. The allowance applies across your private pensions collectively. You can find more information in HMRC’s guidance on the pension annual allowance.
You may also be able to use unused annual allowance from the previous three tax years through carry forward, provided you meet the relevant conditions. If you’re considering a larger contribution, particularly through a limited company, it’s worth checking your position first. HMRC explains the carry-forward rules here.
Balance the Future With What You Need Today
Putting money into a pension means setting it aside for later life, so it’s important not to neglect the money you or your business need today.
For sole traders, that means considering your personal and business cash requirements before deciding what you can comfortably contribute. For limited companies, pension contributions should sit alongside considerations such as Corporation Tax, working capital, future investment and other business commitments.
You don’t have to choose between doing nothing and making a huge pension contribution. Starting with an affordable amount and reviewing it regularly can be a practical way to begin building for the future.
At Greystone Advisory, we can help you understand how pension contributions could fit alongside your business profits, cash flow and wider tax planning. For advice about choosing a pension or particular investments, you should speak to an appropriately regulated financial adviser.
If you’d like to explore how pension contributions could fit into your business and tax planning, get in touch with Greystone Advisory.
