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Pension planning should play an important part of any annual review. This is true for any personal tax clients, but for unincorporated sole traders it can be especially important.

In terms of profit extraction, pension contributions are one of the main tax efficient options available to a sole trader. With sufficient planning and care, contributions provide a very flexible means of achieving tax savings at high marginal rates. Where a sole trader’s marginal rate of income tax fluctuates between tax years due to variations in trading income, pension contributions can be timed to take place in the good years in order to maximise the rate of tax relief received.

Unless advisers are suitably qualified and authorised to give investment advice, it is vital that they do not give investment advice of any sort. This includes advice concerning pensions. Advice should be restricted to the tax consequences of making contributions. For further information, see the Regulated investment advice guidance note.