Is pension advice or are pension fees tax deductible?

Is pension advice tax deductible? HMRC's rules give tax-free routes instead: a £500 allowance from your pot, and £500 an employer can cover.

Which of three routes can apply depends on who pays the adviser. Pots and employers differ by person, so an FCA-authorised adviser can unpick yours: the form on this page requests the free call-back.

Does pension advice get tax relief?

HMRC's rules treat some advice costs as tax free by making the payment authorised or exempt. Three routes cover them:

• The pension advice allowance: your pension scheme pays the adviser up to £500 from a money purchase pot, with no income tax for you.
• An adviser charge paid from the scheme: the scheme can settle the cost of pension advice without an unauthorised payment charge, if two conditions are met.
• Employer-arranged advice: the first £500 in a tax year is exempt from income tax under Section 308C ITEPA 2003.

Paying an adviser yourself is a different matter. For employees, GOV.UK's guide to job expenses says you "might be able to claim tax relief" when you use your own money for things you must buy for your job and use only for work. Whether any part of a fee you settle yourself could qualify is worth asking the adviser when they phone. Relief on money paid into a pension is a separate subject: see pension tax relief.

The three routes also differ in who holds the money. With the allowance and scheme-paid charges, the pot pays; with the employer exemption, the employer pays and your pot is untouched.

What does the pension advice allowance do for tax?

It lets a scheme pay for your advice without the payment being treated as unauthorised. HMRC's Pensions Tax Manual says the member "is not liable to income tax on payments of the pension advice allowance made in respect of them". Each payment is capped at £500 and "must be paid from a money purchase arrangement or a hybrid arrangement directly to the financial advisor providing the advice", so the money never reaches your hands.

It can be used once in a tax year and three times in a lifetime, with no way to carry forward what is unused. The adviser must be authorised by the Financial Conduct Authority, and HMRC's 2017 impact note makes clear that schemes may choose not to offer the allowance. The full set of conditions, and how to ask your provider, are in what the pension advice allowance is.

Can adviser fees be paid from the pension without a tax charge?

Sometimes. A registered pension scheme can pay an adviser for pension advice given to you, and the payment is not an unauthorised member payment if two conditions are met. The manual's wording is "genuinely commercial remuneration arrangements between the member and financial adviser", and an agreed amount "appropriate in relation to the service the adviser provided". Pay more than a genuinely commercial amount and the excess becomes an unauthorised member payment.

The cover is narrower than the advice you might want. HMRC says an unauthorised payment arises where the cost is for more than pension advice relating to the scheme, and gives an example: advice about retirement income from ISAs or other property outside a registered scheme "would not be covered". If one adviser covers your pension and your ISAs, how the bill is split matters.

The tax rule only permits the payment. Whether your provider takes fees from the pot, how, and when, is for the provider to say. How advisers set their charges is covered in pension advice cost, and a fee taken from the pot leaves less invested, which are pension advisers worth it? weighs up.

Is pension advice paid for by an employer a taxable benefit?

Up to a point. When an employer provides pensions advice or pays or reimburses what you spent, HMRC says the first £500 in a tax year is tax free. Anything above is "subject to income tax and National Insurance deductions in the normal way". Former and prospective employees are covered too, and it can cover every pension you hold, whoever runs it.

There are strings attached. The employer's arrangement must be open to staff generally or at a given site, or open on that footing to people close to retirement (within five years of the minimum age at which they could take a pension, so from 50 where that age is 55) or leaving through ill health. HMRC's example is advice offered to everyone in the same position, such as staff nearing retirement. If you work for two employers, each can use the exemption.

Your employer's pensions or HR team can tell you whether it is offered. If you are leaving work through ill health, free ill health retirement advice lists where help is available without charge, and NHS pension advice covers that scheme.

Are pension fees tax deductible, or is that a different cost?

If the fees you mean are an adviser's, paid from the pot, the two conditions above decide whether the payment is taxed. A pension's own running charges are a different cost, taken by the provider as part of running the plan, and are explained in pension charges.

If cost is the obstacle, free pension advice and guidance and Pension Wise are the starting points. Finding a pension adviser explains how to check that one is authorised.

Which of the three routes suits your scheme and your employer may be settled in a single conversation: ask for one on the form here, then raise the fee with an FCA-authorised adviser when they ring.

Questions on the tax side of pension advice

Is pension advice a taxable benefit?

Not within the £500 limit when an employer provides it under a qualifying arrangement. Above £500 in a tax year the excess is taxed as normal. Tax on the employer's pension contributions is a different matter, covered in employer pension contributions tax.

Is there a pension advice tax exemption?

There are two with the same figure. One is for payments from the pension (the allowance), and the other is for employer-provided advice under Section 308C ITEPA 2003. They are different rules and are not the same £500.

Is the pension advice allowance taxed?

No income tax is due from the member, according to HMRC's manual. The money goes straight to the adviser, and it does reduce the pot.

Does the allowance cover advice about my ISAs?

For the allowance, yes in part: HMRC counts advice on taking retirement income from both pension pots and a stocks and shares ISA. A scheme-paid adviser charge is narrower: HMRC says costs for advice about retirement income from ISAs would not be covered, and that part of the bill becomes an unauthorised payment. Your provider can say what it will pay.

Are fees taken from the pot tax free?

They can be, through the allowance or through an adviser charge that meets HMRC's two conditions. The second covers only advice on that scheme, so a bill that also covers other savings needs splitting.