SSAS Tax Benefits for UK Directors

The four tax savings a SSAS gives a UK director

For a UK limited company director, a SSAS is one of the most tax-efficient extraction structures available. The savings come from four distinct mechanisms working together: corporation tax relief on the contribution, tax-free growth inside the scheme, tax-free lump sum at retirement, and (until April 2027) IHT exemption on death. This guide quantifies each.

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A SSAS pension provides UK limited company directors with four primary tax savings: (1) corporation-tax deduction on employer contributions (saving up to 25% at corporation tax rates); (2) income-tax-free growth inside the scheme (no income tax, no CGT); (3) 25% tax-free lump sum at retirement (subject to Lump Sum Allowance, currently £268,275); (4) IHT efficiency on death — though this changes from April 2027. For a director extracting profits, a SSAS contribution can be 20–40% more tax-efficient than equivalent salary or dividend extraction.

By Mike Holt, Operations Director, Holtram TLPI Ltd · HMRC-registered SSAS scheme administrator (HMRC ref A0140182). Established 2003

Last updated: August 2026 · 9 min read · UK 2026/27 tax year

Tax saving 1: Corporation tax relief on the contribution

Employer contributions to a SSAS are deductible against corporation tax, subject to the standard “wholly and exclusively for trade” test (Corporation Tax Act 2009, s.54). For a company paying corporation tax at the main rate (25% for 2026/27), every £1 contributed to a director’s SSAS reduces corporation tax by £0.25.

Worked example: Company makes a £60,000 SSAS contribution on behalf of a director. The contribution is deducted from taxable profits, saving £60,000 × 25% = £15,000 in corporation tax.

Tax saving 2: Tax-free growth inside the SSAS

Investment growth, rental income, dividends, interest, and capital gains earned by the SSAS are not subject to UK tax. This contrasts with non-pension investment vehicles where dividends are taxed (up to 39.35% above the dividend allowance), interest is taxed at marginal rates, and capital gains attract CGT (up to 24%).

Worked example: A £500,000 SSAS portfolio yielding 6% per year inside the scheme grows tax-free. Outside a pension (held in a director’s name), the same yield could be taxed at up to 40–45%, reducing net return materially.

Tax saving 3: Tax-free lump sum at retirement

From age 55 (rising to 57 in April 2028), a SSAS member can take up to 25% of the fund as a tax-free lump sum (Pension Commencement Lump Sum), subject to the Lump Sum Allowance of £268,275 (for 2026/27).

Worked example: On a £1,000,000 SSAS at retirement, £250,000 can be taken tax-free. The remaining £750,000 is taxed only when withdrawn (typically at the member’s marginal income tax rate during retirement years).

Tax saving 4: IHT efficiency on death (current rules until April 2027)

Under current UK pension law, undrawn SSAS funds pass to nominated beneficiaries outside the deceased member’s estate for Inheritance Tax purposes. For a typical IHT-exposed estate (taxed at 40% above £325,000), keeping wealth inside the SSAS can save up to 40% on death.

From April 2027 this changes — undrawn pension funds will be brought into the estate for IHT per the Autumn 2024 Budget. See SSAS and Inheritance Tax for the planning implications.

The combined effect: SSAS vs equivalent dividend extraction

Consider a director with £60,000 of company profit available. Three extraction routes:

Route A: Pay as dividend, invest personally

Corporation tax (25%) on profit: £15,000
Net to dividend: £45,000
Dividend tax (assume higher rate, 33.75%): £15,188
Net cash to director: £29,812
Future investment growth: taxed

Route B: Pay as salary

Employer NI (15%): £7,826
Income tax (40%): £20,870
Employee NI (2%): £1,043
Net cash to director: £30,261
Future investment growth: taxed

Route C: Pay as SSAS contribution

Corporation tax saving: £15,000 (refund/reduction)
Full £60,000 in SSAS, grows tax-free
At retirement: 25% tax-free (£15,000 in this example), 75% (£45,000) taxed at member’s marginal rate — potentially basic-rate in retirement
If basic-rate (20%) on the £45,000 taxable portion: £9,000 tax
Net to director (after retirement): £51,000+ (depending on growth)

The SSAS route delivers approximately 70% more net wealth to the director, before considering tax-free growth over the intervening years and IHT efficiency. The trade-off is that funds are locked until age 55+.

Four tax savings

Where SSAS saves you tax

Corporation tax: 25% saving on contribution
Investment growth: tax-free inside the scheme
Retirement: 25% tax-free lump sum
Death: outside the estate (until April 2027)

Worked example

£60k contribution vs £60k dividend

Dividend route: ~£29,800 net
SSAS route: ~£51,000+ net (over time)
Saving: ~70% more net wealth via SSAS
Trade-off: locked until age 55+

Frequently asked questions

Are SSAS contributions corporation-tax deductible?

Yes — subject to the 'wholly and exclusively for the trade' test. The contribution must be commercially justifiable as remuneration for the member's role.

Is investment growth inside a SSAS tax-free?

Yes. No income tax on dividends, interest or rental income. No capital gains tax on gains realised inside the scheme.

How much of my SSAS can I take tax-free?

Up to 25% as a Pension Commencement Lump Sum from age 55 (57 from April 2028), subject to the Lump Sum Allowance (£268,275 for 2026/27).

Does the SSAS pay tax on withdrawals?

The 25% PCLS is tax-free. The remaining 75% is taxed at the member's marginal income tax rate when drawn — typically basic-rate during retirement.

Is a SSAS still IHT-free?

Currently yes (until 5 April 2027). From 6 April 2027, undrawn pension funds including SSAS will be brought into the estate for IHT per the Autumn 2024 Budget.

Is a SSAS contribution more tax-efficient than dividend extraction?

Almost always, for higher-rate-tax directors. The combined corporation-tax saving, tax-free growth, and tax-free lump sum typically deliver 50–100% more net wealth than equivalent dividend extraction.

Can I claim back personal income tax on my own SSAS contribution?

Yes, on personal (not employer) contributions. The pension provider claims 20% basic-rate relief at source; higher-rate taxpayers claim the additional 20–25% via Self Assessment.

Sources & references

Disclaimer: This article is for educational purposes only and does not constitute financial advice. SSAS pensions are corporate occupational pension schemes registered with HMRC and overseen by The Pensions Regulator (TPR); they do not fall under FCA regulation. For personalised advice, consult a separately FCA-authorised independent financial adviser.

SSAS Tax Benefits for UK Limited Company Directors