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Not All Savings Are Created Equal

A quick guide to ISAs, pensions, and what actually affects your tax return – bear in mind this is not financial advice as I am not an IFA.

Why this matters:

Every year, clients tell us they’ve paid into a “Pension ISA” – but spoiler alert: that isn’t a real thing. The type of account you use to save or invest determines whether it gets tax relief and whether it affects your Self Assessment tax return.

Let’s break it down:

  1. Individual Savings Accounts (ISAs)
  • Cash ISAs and Stocks & Shares ISAs are tax-free savings accounts.
  • You do not get tax relief on the money you put in.
  • You do not report ISA contributions or income on your tax return.
  • Max contribution (2025/2026): £20,000 total across all ISAs.

Impact on tax return: ❌ None

  1. Lifetime ISAs (LISA)
  • Can be used to buy a first home or saved for retirement (access from age 60).
  • Government adds 25% bonus (up to £1,000/year).
  • Only available to those aged 18 to 39 at the time of opening.
  • Does not affect your tax return. You do not get higher rate tax relief.

Impact on tax return: ❌ None

  1. Personal Pensions (Including SIPPs)
  • You can contribute and receive basic rate tax relief at source.
  • If you’re a higher or additional rate taxpayer, you may be entitled to extra relief via your Self Assessment.
  • Contributions can reduce your taxable income, affecting how much tax you pay.

Impact on tax return: ✅ Yes

  • Include the gross amount (i.e. your contribution + 20% tax relief added by the provider).
  • The contributions are not an allowable expense/deduction from your self employment income. It is dealt with elsewhere in the tax return and increases the threshold between paying 20% income tax and 40% income tax.
  1. Workplace Pensions – if PAYE
  • Usually handled via your payslip (auto-enrolment).
  • If paid by salary sacrifice, they’re already deducted from taxable pay.
  • If paid net, you may need to report grossed-up contributions to claim extra relief.

Impact on tax return: ✅ Possibly (if you’re higher rate and contributions aren’t via salary sacrifice)

Final word:

If you’re not sure what you’ve paid into, ask your provider:

  • Is it an ISA or a pension? It may just be a savings pot.
  • Have you received tax relief on the contribution?
  • Will they send a pension certificate or statement for your Self Assessment?

And if you’re still unsure, just forward the paperwork to us – it’s easier to confirm from the source than guess from the name!

Performance Accountancy – Tax guidance that speaks your language (and your instrument!) – www.performanceaccountancy.co.uk