As you may already know the deadline for investing in these were yesterday for the 2016/17 tax year. However, the new tax year 2017/18 has just begun, and if you are looking for a longtern tax free solution then consider the following.

As a contractor you can personally invest up to 100% of your income into a pension and benefit from income tax relief at your highest marginal rate, so for every £6 that you contribute, the government could be paying £4.

However, the real savings come in to play when you invest via your limited or umbrella company.

If you operate as a one-person ‘Ltd’ then you can get the company to fund a pension on your behalf. This allows you to continue drawing a tax efficiently low salary to reduce your national insurance, without missing out on the lucrative tax savings associated with pension investment. The company can invest up to £255,000 per annum which can significantly reduce your corporation tax bill, while transferring money from the company into personal hands.

If you are contracting through an umbrella company then the tax saving opportunities are even greater. You can now benefit from up to 48% tax relief on pensions contributions as the umbrella can contribute to a pension scheme on your behalf before you take your salary. This means you save onnational insurance, employers and employees income tax which can boost your retirement fund significantly. Some of our contractor clients choose to take the minimum wage and transfer everything else in to a pension in order to
keep more of their income out of the taxman’s grasp.

The only argument against pension investment is that you can’t access the funds immediately. However if you have already built up a savings buffer in an ISA, as you have, then this shouldn’t discourage you. If you can afford to continue investing up to the ISA limit each year, and contribute to a pension fund, then this would offer you the safety net of savings to fall back on in the short term, while still benefiting you from the tax savings associated with pensions. Also, subject to minimum age, you can withdraw 25% of your pension straight away without having to stop benefitting from the tax savings available.

Below are a few providers:

• Hargreaves Lansdowne
• TD Direct Investing UK