What are the tax rules for a SSAS pension?

At a Glance: Key Tax Figures for 2025/26

How does Corporation Tax relief on SSAS contributions work?

When your company — the sponsoring employer — makes a contribution to a SSAS, that contribution is a deductible business expense for Corporation Tax purposes. The relief applies under Chapter 2 of Part 16 of the Corporation Tax Act 2009, subject to the condition that the contribution is paid “wholly and exclusively” for the purposes of the trade (PTM043200).

In practice, pension contributions for working directors routinely satisfy the wholly-and-exclusively test. HMRC’s own guidance acknowledges that a contribution for a controlling director or connected employee qualifies where it is in line with what would have been paid for an unconnected employee in a similar role. For director-shareholders building a retirement fund through a SSAS, this is a core structural advantage: the company’s pre-tax profits fund the pension, rather than the director paying contributions from already-taxed personal income.

There is an important timing rule under Finance Act 2004 s.196(2): Corporation Tax relief applies in the accounting period in which the contribution is actually paid — not when it is accrued. For large contributions, particularly one-off payments using carry-forward allowances, the accounting period of payment determines which year’s tax bill is reduced.

The relief is not capped in terms of a maximum employer contribution amount — the Annual Allowance cap applies to the individual member, not to the employer’s deduction claim. However, where a contribution significantly exceeds the commercial norm for a given director’s role and salary, HMRC may scrutinise the wholly-and-exclusively test more closely.

What is the Annual Allowance, and how does carry forward work?

The Annual Allowance is the maximum amount that can be contributed to all of a member’s pension arrangements in a single tax year without triggering an Annual Allowance charge. For 2025/26 and 2026/27, the Annual Allowance is £60,000 per individual (HMRC Pension Schemes Rates, updated 6 April 2026).

This £60,000 covers the combined total of employer contributions and any personal contributions made by the member across all registered pension schemes, including a SSAS, any legacy workplace pensions, and any personal pension arrangements. It is an individual allowance — a SSAS with three director-members could receive up to £180,000 in combined contributions (£60,000 × 3), provided each member individually stays within their own limit.

Carry forward allows unused Annual Allowance from the previous three tax years to be added to the current year’s allowance. The rules are:

• Unused allowance can be carried forward from the previous three tax years (Finance Act 2004 provisions; PTM055000 series)
• The member must have been a member of a registered pension scheme in each of those years (membership of any scheme counts — including a legacy workplace pension or SIPP)
• The current year’s allowance must be fully used before drawing on carried-forward amounts
• Carried-forward allowances are used in chronological order, oldest first

A director who has not contributed to any pension for three years and sets up a SSAS in 2025/26 could potentially contribute up to £220,000 in their first year: £60,000 (2025/26) + £60,000 (2024/25) + £60,000 (2023/24) + £40,000 (2022/23 — the allowance in that year was £40,000). This is the most common scenario in which directors use a SSAS for an initial large contribution, often structured as a company contribution for maximum Corporation Tax benefit.

Carry forward calculations can be complex where a member holds or has held a defined benefit scheme; in those cases the defined benefit pension input amount (the growth in DB entitlement, actuarially calculated) must be included. Confirm carry forward calculations with a qualified adviser before committing to a large contribution.

What is the Tapered Annual Allowance, and who does it affect?

The Tapered Annual Allowance (TAA) reduces the £60,000 Annual Allowance for high-earning individuals. It applies when two tests are both met (Finance Act 2004 s.228ZA):

• Threshold income exceeds £200,000 (broadly, all income before pension contributions)
• Adjusted income exceeds £260,000 (broadly, all income plus employer pension contributions)

Where both thresholds are exceeded, the Annual Allowance reduces by £1 for every £2 of adjusted income above £260,000. The minimum tapered allowance is £10,000 — this floor was confirmed for 2025/26 and 2026/27 (HMRC Pension Schemes Rates, updated 6 April 2026).

For most SSAS directors, the Tapered Annual Allowance is not relevant — directors taking a modest salary and directing the majority of pension funding through employer contributions would typically have threshold income below £200,000. However, directors with significant investment income, multiple directorships, or large employer contributions in the same year should model their adjusted income carefully. See the dedicated article on SSAS Tapered Annual Allowance for a worked calculation.

What does “tax-free growth” mean inside a SSAS?

The phrase “tax-free growth” has a precise meaning in the SSAS context:

No Income Tax on investment income. Rental income from commercial property held in the scheme, interest on deposits, and dividends on equities are all received by the scheme without Income Tax being deducted or chargeable. This is a direct benefit of being a registered pension scheme under the Finance Act 2004.

No Capital Gains Tax on disposals. When the SSAS sells an asset — a commercial property, a holding of equities, or any other permitted investment — any gain realised is not subject to Capital Gains Tax (CGT) within the scheme. Outside a pension wrapper, a director selling commercial property might face CGT at 24% on the gain. Inside the SSAS, that gain stays fully within the scheme.

The practical significance is substantial. A commercial property purchased for £500,000 and sold for £800,000 produces a £300,000 gain. Outside a pension, a basic-rate CGT charge (ignoring reliefs and indexation) might cost £72,000. Inside the SSAS, the entire £300,000 gain remains invested and continues to compound. Over the typical 15–30 year accumulation period of a director’s SSAS, this compounding advantage is the dominant source of outperformance relative to holding the same assets personally.

The tax-free treatment applies to the accumulation phase — the period during which funds remain in the scheme and are not being drawn as benefits. When benefits are eventually drawn, Income Tax applies in the normal way (see the drawdown section below and the dedicated SSAS Drawdown Rules article).

How does drawdown taxation work for a SSAS?

SSAS members can access benefits from age 55 (the current normal minimum pension age under Finance Act 2004 s.279(1); PTM062100). This rises to 57 on 6 April 2028 — a change that will apply to the majority of SSAS members who do not hold a transitional protection from a pre-2006 scheme rule.

The pension commencement lump sum (PCLS) — the “25% tax-free cash”

When a member crystallises their SSAS funds, they can take up to 25% of the crystallised amount as a tax-free lump sum (the pension commencement lump sum, or PCLS). Since the abolition of the Lifetime Allowance in April 2024, the maximum PCLS across all pension arrangements in a member’s lifetime is capped at £268,275 — the Lump Sum Allowance (LSA) for 2025/26 and 2026/27 (HMRC Pension Schemes Rates, updated 6 April 2026). Any PCLS taken reduces this lifetime limit.

For funds above £1,073,100 (the LSA equivalent at 25%), the 25% entitlement on the excess is still available arithmetically but the LSA cap means the excess above £268,275 is subject to Income Tax if taken as a lump sum.

Flexi-access drawdown

The remaining 75% of crystallised funds enters flexi-access drawdown, from which income can be drawn at any level, at any frequency. All drawdown income is subject to Income Tax at the member’s marginal rate in the year received — it is treated as earned income and stacks on top of any other taxable income.

The Money Purchase Annual Allowance (MPAA)

Taking any income from flexi-access drawdown triggers the MPAA, which reduces the member’s Annual Allowance for future money purchase pension contributions to £10,000 per year (HMRC Pension Schemes Rates, updated 6 April 2026). This is permanent. Directors who intend to continue making significant pension contributions while drawing benefits need to plan the sequencing of crystallisation carefully. Taking the 25% tax-free cash lump sum alone — without also drawing drawdown income — does not trigger the MPAA.

See the dedicated SSAS Drawdown Rules article for a full treatment of phased crystallisation, UFPLS, and annuity options.

What is changing for death benefits and IHT from April 2027?

Under current rules (pre-April 2027), pension funds in a SSAS sit outside a member’s estate for Inheritance Tax (IHT) purposes. Because a SSAS is structured as a discretionary trust, pension assets are not legally owned by the member — the trustees hold them — and therefore they are not part of the estate on death. With IHT applying at 40% on estates above the nil-rate band (currently £325,000), the IHT-exempt status of pension wealth is a significant planning consideration for directors with large SSAS funds.

The April 2027 change. The Autumn Budget 2024 announced that from 6 April 2027, unspent pension funds will be included within a deceased member’s estate for IHT purposes. This is a fundamental change. From that date, the value of a SSAS on the member’s death will be aggregated with the rest of the estate and subjected to IHT where the total exceeds the available nil-rate bands.

The Income Tax treatment on payment to beneficiaries is expected to continue unchanged alongside the new IHT charge:

• Death before age 75: lump sums to beneficiaries currently free of Income Tax (within the Lump Sum and Death Benefit Allowance of £1,073,100 — HMRC Pension Schemes Rates, updated 6 April 2026)
• Death at or after age 75: income paid or lump sums taken by beneficiaries subject to Income Tax at their marginal rate

The risk of double taxation — IHT on the pension estate combined with Income Tax when beneficiaries draw the funds — is real and requires careful consideration ahead of 6 April 2027. The implementation details, including how the IHT charge will be administered and collected, remain subject to ongoing HMRC consultation and should be confirmed against the final Finance Bill text before making planning decisions.

See the SSAS Death Benefits article for the full current rules, and the upcoming Phase 2 article on SSAS Inheritance Tax 2027 for in-depth planning considerations.

Worked Example: How employer contributions reduce the Corporation Tax bill

Scenario: A company director takes a salary of £50,000 per year. The company makes profits of £400,000 in the year to 31 March 2026. The director has been a member of a registered pension scheme for the past three years but has made no contributions. They establish a SSAS and the company makes a £220,000 employer contribution in the year, using carry-forward allowance from 2022/23, 2023/24, and 2024/25.

Carry forward available:

• 2022/23: £40,000 unused allowance
• 2023/24: £60,000 unused allowance
• 2024/25: £60,000 unused allowance
• 2025/26: £60,000 current year allowance
• Total available: £220,000

The £220,000 has moved from taxable profits into a pension wrapper where it grows free of Income Tax and CGT, and from which the director can ultimately draw benefits (with 25% tax-free up to the LSA cap of £268,275). The £55,000 Corporation Tax saving is a direct cash benefit to the company in the year of contribution, provided the contribution is paid in the relevant accounting period (Finance Act 2004 s.196(2)).

This example is illustrative. Individual tax outcomes depend on the company’s full circumstances, whether the wholly-and-exclusively test is met (PTM043200), and the director’s personal pension history. Corporation Tax rates may also vary. Always seek professional advice before making large pension contributions.

Frequently Asked Questions

What is the Annual Allowance for a SSAS in 2025/26?

The Annual Allowance for 2025/26 is £60,000 per individual member, covering the combined total of all employer and personal contributions across all pension arrangements. The same £60,000 figure applies in 2026/27 (HMRC Pension Schemes Rates, updated 6 April 2026). If you have three directors in a SSAS, each member has their own £60,000 limit — the scheme could collectively receive up to £180,000, subject to each member staying within their individual limit.

Can a SSAS member carry forward unused Annual Allowance?

Yes. Unused Annual Allowance from the previous three tax years can be carried forward, provided the member was a member of a registered pension scheme in each of those years. The current year’s allowance must be used first. In 2025/26, a member who made no contributions in the previous three years could potentially contribute up to £220,000 in a single year (£60,000 current year + £60,000 + £60,000 + £40,000 from 2022/23 when the allowance was lower).

Is there a Corporation Tax deduction on SSAS employer contributions?

Yes. Employer contributions to a registered pension scheme are deductible for Corporation Tax purposes under Chapter 2 of Part 16 of the Corporation Tax Act 2009, provided the contribution is “wholly and exclusively” for the purposes of the trade (PTM043200) and is actually paid in the accounting period in which relief is claimed (Finance Act 2004 s.196(2)). For most working directors, this test is straightforwardly met.

What happens if you exceed the Annual Allowance?

The excess is subject to an Annual Allowance charge on the individual member — effectively Income Tax at their marginal rate on the amount over the limit. The charge is reported via self-assessment. The money is not returned; it stays in the pension. But the tax advantage on the excess is neutralised. Where the charge is significant, a “scheme pays” mechanism may be available.

What is the Money Purchase Annual Allowance, and when does it apply?

The Money Purchase Annual Allowance (MPAA) is £10,000 per year (HMRC Pension Schemes Rates, updated 6 April 2026). It applies once a member has flexibly accessed pension benefits — for example, by taking income from flexi-access drawdown or an uncrystallised funds pension lump sum (UFPLS). From that point, maximum contributions to any money purchase pension (including a SSAS) are limited to £10,000 per year. Taking only the 25% tax-free lump sum without drawing drawdown income does not trigger the MPAA.

What is the Lump Sum Allowance, and has the Lifetime Allowance been abolished?

The Lifetime Allowance (LTA) was abolished from 6 April 2024. In its place, HMRC introduced the Lump Sum Allowance (LSA) of £268,275, which caps the total tax-free lump sums a member can take across all pension arrangements during their lifetime. A second allowance — the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 — caps the total of all tax-free lump sums including death benefit payments. Both figures apply for 2025/26 and 2026/27 (HMRC Pension Schemes Rates, updated 6 April 2026). There is no longer any limit on the total size of pension funds a member can accumulate.

When can I access my SSAS pension?

The normal minimum pension age is currently 55 (Finance Act 2004 s.279(1); PTM062100). This rises to 57 on 6 April 2028. Most SSAS members without a protected pension age from a pre-2006 scheme will be subject to the 57 minimum from 2028. Early access before these ages is only possible in circumstances of serious ill-health that meet HMRC’s qualifying criteria.

Is a SSAS pension subject to Inheritance Tax?

Under current rules (pre-April 2027), SSAS pension funds are outside a member’s estate for IHT purposes and are not subject to the 40% IHT charge. From 6 April 2027, unspent pension funds will be included in the estate for IHT (Autumn Budget 2024 announcement). The Income Tax treatment on payment to beneficiaries remains unchanged. Directors with substantial SSAS funds should review their position before April 2027. See SSAS Death Benefits and our upcoming SSAS Inheritance Tax 2027 article.