Pension Planning for Restaurant Owners

For many restaurant owners, pensions are not at the top of their mind. Cash is often reinvested into the business, and retirement planning can fall behind. Yet pensions remain one of the most effective ways to reduce tax and secure long-term financial stability.


Why pensions matter


Contributions to a registered pension scheme benefit from tax relief. For higher earners, this can mean significant savings. A £800 contribution is topped up by HMRC to £1,000, with additional higher or additional rate relief available through your tax return. In practice, this means contributions can cost as little as 55–60p for every £1 invested.


Key rules to be aware of


  • Annual allowance: For 2025/26, the maximum contribution is £60,000 gross, subject to 100% of relevant earnings. Unused allowances from the previous three years can be carried forward.


  • Tapered allowance: If threshold income exceeds £200,000 and adjusted income exceeds £260,000, the annual allowance is reduced by £1 for every £2 over the limit, down to a minimum of £10,000.


  • Employer contributions: Contributions made by the company are not restricted by your personal earnings. This can be particularly valuable for owner-managers drawing a mix of salary and dividends.


  • Inheritance Tax: From April 2027, unspent defined contribution pension pots will fall within the estate for IHT purposes. Owners with larger pension funds should review estate plans in light of this.


Planning points for restaurant owners


  • Use salary sacrifice to reduce taxable income. Both you and the business save on NICs, and the employer’s NIC saving can be added to your pension.

  • Carry forward unused annual allowances to shelter large profits or bonuses. This can be especially relevant in good trading years.

  • Balance salary and dividends carefully. Employer pension contributions can be more efficient than drawing additional dividends and investing personally.

  • Review succession planning. With IHT changes on the horizon, align pension savings with other estate planning measures.


Example


A restaurant owner earning £120,000 and drawing £40,000 in dividends has exceeded the point where personal allowance is lost. By making a £20,000 net pension contribution (£25,000 gross), the full allowance is restored, saving £8,000 in tax immediately, while also building long-term savings.


Final thoughts


Pensions remain a very useful tool for restaurant owners, both for tax relief and for long-term security. The rules are complicated, and the right approach depends on how you structure your income and your future plans. Seeking professional advice ensures contributions are maximised without triggering unexpected charges.


If you would like tailored advice on pension planning, book a call with one of our accounting experts.


Restaurants, cafes, and takeaways can benefit greatly from working with a specialist accountant. If you hadn’t noticed already, we are specialist accountants in Leeds for food service businesses, so unlike most accountants, we have years of experience working with businesses just like you. If you're interested in finding out more about how we can help your restaurant become more profitable, book a call with one of our accounting experts.