A Self-Invested Personal Pension is one of the most tax-efficient ways to save for retirement — especially if you're self-employed. Here's how it works, in plain English.
Move the slider to see what the government adds to a basic-rate contribution.
Basic-rate relief (20%) is added automatically by your pension provider. If you pay tax at 40% or 45%, you can claim the extra through your Self Assessment return — that's where we come in.
A SIPP is a personal pension that you control. Like any pension, it's a tax-advantaged pot for your retirement — but instead of a provider choosing where your money goes, you decide how it's invested, within a single tax-efficient wrapper.
For sole traders, gig workers and company directors with no workplace scheme behind them, a SIPP is often the entire pension plan. The earlier you start, the harder tax relief and compounding work in your favour.
Every contribution you make is topped up by the government. At the basic rate, for every £80 you pay in, £20 is added — turning £80 into £100 inside your pension, automatically.
Higher-rate (40%) and additional-rate (45%) taxpayers get even more — but the extra slice isn't automatic. It's claimed through your Self Assessment return, which is exactly the part PTL handles for you.
You can normally start taking money from a SIPP from age 55 (rising to 57 from 6 April 2028). Usually up to 25% can be taken tax-free, with the rest taxed as income when you draw it.
One thing to know: once you start flexibly drawing an income (beyond the tax-free lump sum), the amount you can keep paying in with tax relief drops to £10,000 a year. It's worth planning the timing carefully.
From 6 April 2027, most unused pension funds and death benefits will count as part of your estate for Inheritance Tax. Pensions have long been a useful way to pass wealth on, so this is worth factoring into longer-term plans.
A SIPP can suit you if you're self-employed, run your own company, or simply want more control and the full benefit of tax relief. Whether a specific SIPP and investment choice suits your circumstances is a regulated financial advice question — one for a qualified, FCA-authorised adviser.
What PTL makes sure of is the tax side: that your contributions are recorded correctly and every pound of relief you're entitled to is claimed on your return.
This guide is general information about how SIPPs and pension tax relief work in the 2026/27 tax year. It isn't personal financial advice, and isn't a recommendation to take out, transfer or invest in any particular pension.
PTL Bookkeeping & Accounting provides bookkeeping, accounts and tax services. We don't advise on pension suitability, transfers or investments — for that, please speak to an FCA-authorised financial adviser. Tax rules and allowances can change, and the value of investments can fall as well as rise.
If you're a higher-rate taxpayer paying into a SIPP, there may be relief sitting unclaimed in your Self Assessment. Let's check.
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