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Tax if you're self-employed and getting a pension

Reaching State Pension age doesn't automatically mean retirement from work. If you're self-employed you may decide to continue working and claim your State Pension. You may also receive a company or personal pension, or both. How you'll pay tax will depend on your circumstances.

If you're self-employed and your only pension is the State Pension

If you're self-employed, you'll probably already be completing a Self Assessment tax return each year to:

  • report your overall income and any capital gains
  • claim any tax allowances against your tax bill

Once you start receiving the State Pension you must declare this on your tax return as well. This is because it's taxable income that is paid to you without tax taken off.

Remember that you stop paying National Insurance contributions (NICs) from State Pension age - so you'll no longer need to include these on your tax return. The only exception is Class 4 NICs which are due on taxable profits made in the tax year in which you reached State Pension age.  

  • Making sure you've stopped paying National Insurance  
  • Tax returns for the self employed on nibusinessinfo website

    • If you're self-employed and get a company or personal pension and the State Pension

    If you're self-employed and getting one or more pensions as well as the State Pension, you'll pay tax in a number of different ways.

    You'll pay tax on your self-employment income (and usually on other sources of untaxed income, apart from the State Pension) through Self Assessment after completing a tax return each year. You'll pay tax on any company or personal pension you receive through the PAYE (Pay as You Earn) system. Your Tax Office issues a tax code which will tell the pension provider how much to take off your pension(s) before they pay you.

    The tax code is based on the information you've given about your overall income. If you get the State Pension as well, HM Revenue & Customs (HMRC) normally asks your pension provider to take off any tax owed on it at the same time by giving them a new tax code for you.

    If you're self-employed and on a low income

    If you're self-employed and you get a pension, you may be on a low income. In this case you may be able to claim Pension Credit to supplement your low income.

    Becoming self-employed for the first time

    You may decide to become self-employed for the first time in retirement. To do so you'll need to register with HMRC. You need to do this within three months of becoming self-employed. You can download the registration form or register by calling them on 0845 915 4515.

    Employing an accountant

    You don't have to employ an accountant (agent) if you don't want to, but you may find that, for a fee, an accountant can help you manage your tax return.

    If you're worried about your tax

    If you're worried that you're paying too much tax or if you have any other questions about tax and self-employment after State Pension age, you can contact your Tax Office. Or you can call the Newly Self-Employed Helpline on 0845 915 4655. Lines are open from 8.00 am to 5.00 pm Monday to Friday.

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