Retirement plans for freelancers: SEP IRA vs Solo 401(k), UK pensions, RRSPs, and super

Retirement accounts for freelancers at a glance

United States: 2026 contribution limits

The IRS announced the 2026 limits in November 2025: ^{[1] [2]}

• 401(k) employee deferral: $24,500 (up from $23,500).
• Catch-up at age 50 or older: $8,000. At ages 60 to 63, a higher $11,250 applies instead.
• Overall defined contribution limit (Section 415(c)): $72,000, not counting catch-ups.
• Compensation that can be counted: up to $360,000.
• IRA limit: $7,500, plus a $1,100 catch-up at age 50 or older.

2027 limits: not yet announced. When this guide was reviewed on November 4, 2026, the IRS limits table still showed 2026 as the latest year. ^[3] Plan with the 2026 numbers and recheck once the IRS publishes its 2027 notice.

SEP IRA vs Solo 401(k)

SEP IRA

• Any business can set one up, including a one-person business. Only the employer contributes: up to 25% of each eligible employee's pay. ^[4]
• For your own account, compensation means net self-employment earnings minus half of your self-employment tax and minus the contribution itself. ^[4] That works out to an effective 20% of net profit after the half-SE-tax deduction (the IRS rate table converts 25% to 20%). ^[6]
• Deadline: you can set up and fund a SEP as late as the due date of your return, including extensions. ^[4]
• If you hire, eligible employees (age 21 or older, who worked for you in 3 of the last 5 years and earned at least $800 in 2026) must get the same percentage you give yourself. ^{[4] [3]}
• Roth SEP contributions are allowed for tax years after 2022, but providers don't have to offer them. ^{[6] [4]}

Solo 401(k) (one-participant 401(k))

• You contribute twice: as the employee (deferral up to 100% of compensation, capped at $24,500 for 2026) and as the employer (up to 25% of compensation, so about 20% of net self-employment earnings for a sole proprietor). ^{[5] [1]}
• Catch-ups sit on top of the $72,000 cap, which a SEP doesn't allow. ^[2]
• Many providers offer Roth deferrals, which matters if your income is too high for a Roth IRA. Check before you open one.
• Once plan assets reach $250,000 or more at year-end, you generally have to file Form 5500-EZ each year. ^[5]
• The $24,500 deferral limit is per person, not per plan. If you also have a 401(k) at a day job, deferrals to both count toward the same limit.

Deadlines for 2026 contributions

• Solo 401(k): the safe move is to open it by December 31, 2026. Since 2023, a sole proprietor with no employees can also adopt a new 401(k) after year-end, as long as it is adopted by the filing deadline without extensions (April 15, 2027 for most people). Elective deferrals for that first year must be paid in by the same date. ^[6] Employer contributions can be made up to your return due date, plus extensions. ^[6]
• SEP IRA: open and fund by your 2026 return due date including extensions (April 15, 2027, or October 15, 2027 if extended). ^[4]
• Traditional or Roth IRA: by your return due date, not including extensions (April 15, 2027 for 2026 contributions). ^[9]

Worked example: SEP vs Solo 401(k) at two income levels

Hypothetical sole proprietor, under 50, no employees, no other retirement plan, 2026 limits. Self-employment tax is 15.3% of 92.35% of net profit (both incomes are below the $184,500 Social Security wage base). ^[7]

At $60,000 of profit, the Solo 401(k) allows over three times the SEP amount ($35,652 vs $11,152). At $150,000 the gap narrows but is still $24,500. The SEP only catches up when 20% of your contribution base reaches the $72,000 cap, which takes a base of $360,000. Both totals here are well under the $72,000 limit. Figures are rounded down to whole dollars; your provider or tax software runs the exact calculation.

Contributions you make for yourself are deducted on Form 1040, not Schedule C, so they reduce income tax but not self-employment tax. The freelance tax deductions guide shows how this fits with your other deductions.

Which US plan should you pick?

• Choose a Solo 401(k) if you have no employees (a spouse working in the business can join), you want the largest contribution at moderate income, or you want Roth contributions above the Roth IRA income limits.
• Choose a SEP IRA if you want minimum admin, you are deciding after December 31 and missed the Solo 401(k) timing, or your contribution base is high enough that 20% already covers what you want to save.
• Add an IRA if you have room left. Being in a SEP or Solo 401(k) makes you an active participant: for 2026, the traditional IRA deduction phases out between $81,000 and $91,000 of modified AGI for single filers ($129,000 to $149,000 married filing jointly). Roth IRA eligibility phases out between $153,000 and $168,000 single and $242,000 to $252,000 joint. ^{[2] [8]}
• Backdoor Roth users: SEP IRA balances count as traditional IRA money in the pro-rata calculation on Form 8606. A Solo 401(k) doesn't.

United Kingdom: personal pensions and SIPPs

• How relief works: with relief at source, you pay in from taxed income and your provider adds basic-rate relief of 20%. Higher and additional rate taxpayers claim the extra relief through Self Assessment. ^[10]
• Limits: relief applies to contributions up to 100% of your annual earnings. With no earnings, the provider can still claim relief on up to £2,880 a year (£3,600 once the 20% is added). ^[10] The annual allowance is £60,000, and you may carry forward unused allowance from the previous 3 tax years. ^[11]
• High earners: the allowance tapers when threshold income is over £200,000 and adjusted income is over £260,000, down to a minimum of £10,000. Once you have flexibly accessed a pension, the money purchase annual allowance of £10,000 applies. ^{[11] [12]}
• SIPP: a type of personal pension that lets you choose the specific investments. A stakeholder pension is a simpler, charge-capped alternative. ^[13]
• Access: the normal minimum pension age rises from 55 to 57 from 6 April 2028. ^[14]

Example (England, 2026 to 2027, hypothetical): a sole trader with £70,000 profit pays £8,000 into a SIPP. The provider adds £2,000, so £10,000 goes in. All £10,000 sits in income taxed at 40%, so they claim another £2,000 (20% of £10,000) through Self Assessment. Net cost: £6,000 for a £10,000 contribution. Self-employed people don't get employer contributions, so this is the only top-up you get.

Canada: RRSP and TFSA

• RRSP room for a year is the lower of 18% of the previous year's earned income and the annual limit, plus unused room carried forward, minus any pension adjustment. ^[16] The limit is $33,810 for 2026 and $35,390 for 2027. ^[15]
• Deadline: contributions made in the first 60 days of the next year count for the previous tax year. For 2025 that ran to March 2, 2026. ^[16] For 2026, the 60th day of 2027 is March 1, 2027. Your Notice of Assessment shows your exact room.
• Over-contributions more than $2,000 above your limit are generally taxed at 1% a month. ^[16]
• TFSA: $7,000 of new room for 2026. Contributions aren't deductible, but growth and withdrawals are tax-free. ^{[15] [17]} The CRA hadn't listed a 2027 TFSA limit in its table when this guide was reviewed.

Example: 2025 net self-employment income of $90,000 gives 18% × $90,000 = $16,200 of new RRSP room for 2026, below the $33,810 cap. You would need 2025 earned income of about $187,834 to reach the cap. A common rule of thumb: favour the RRSP in high-income years and the TFSA in low-income years or when you might need the money.

Australia: personal super contributions

• Sole traders don't have to pay super guarantee for themselves, so nothing goes in unless you contribute. ^[19]
• Concessional cap: $32,500 from 1 July 2026 (it was $30,000 for 2025–26). Personal contributions you claim as a deduction count toward it and are generally taxed at 15% in the fund. ^{[18] [19]}
• Notice of intent: you must give your fund a notice of intent to claim and receive its acknowledgment before claiming the deduction. The ATO's deadline is the earlier of the day you lodge that year's return or 30 June of the following year (for 2025–26 contributions, 30 June 2027). ^[19] For 2026–27 contributions, the same rule points to 30 June 2028 at the latest.
• Carry-forward: if your total super balance was under $500,000 at the previous 30 June, you can use unused concessional cap amounts from up to 5 previous years. From age 67 to 74 you need to meet the work test or its exemption to claim a deduction. ^[18]
• Division 293: an extra 15% tax on concessional contributions applies when income plus those contributions is above $250,000. ^[20]

Example (hypothetical, 2026–27): a sole trader contributes $20,000, lodges a notice of intent and gets it acknowledged. The fund pays 15% contributions tax ($3,000). If their marginal rate is 30% plus the 2% Medicare levy, the deduction saves $6,400 of personal tax, about $3,400 more in their pocket than taking the $20,000 as income.

Build retirement into your rates and cash flow

An employee's pension contribution is built into their pay. Yours has to come out of your prices. Decide what you want to save each year (a fixed percentage of profit you can sustain, such as 10%), include it in the target income you enter in the freelance rate calculator, and use the 2027 rate review if your current rates can't cover it.

A simple system: when a client pays, move tax into one account and retirement into another, then contribute monthly or quarterly. That keeps the tax money separate (the tax set-aside calculator sizes it) and avoids a scramble before the deadline. In the US, a deductible contribution also lowers your income tax, which can reduce the January 15, 2027 estimated tax payment. For more money guides, see the money, tax and bookkeeping pillar.

Common mistakes

• Using 25% instead of 20% for your own SEP or Solo 401(k) employer contribution. For a sole proprietor, the 25% applies to a base that already excludes the contribution.
• Missing the Solo 401(k) setup window and assuming it works like a SEP.
• Exceeding the per-person deferral limit across a day-job 401(k) and a Solo 401(k).
• Opening a SEP IRA while doing backdoor Roth conversions.
• In Australia, lodging before the fund acknowledges your notice of intent. Without the acknowledgment, there is no deduction.
• Waiting for a good year. Small regular contributions beat a large one that never happens.

FAQ

Sources

Primary sources referenced above (checked November 4, 2026)

1. IRS: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500
2. IRS Notice 2025-67: 2026 amounts relating to retirement plans and IRAs
3. IRS: COLA increases for dollar limitations on benefits and contributions
4. IRS: Simplified Employee Pension plan (SEP)
5. IRS: One-participant 401(k) plans
6. IRS Publication 560, Retirement Plans for Small Business
7. IRS: Self-employment tax (Social Security and Medicare taxes)
8. IRS: Retirement topics, IRA contribution limits
9. IRS Publication 590-A, Contributions to IRAs
10. GOV.UK: Tax on your private pension contributions, tax relief
11. GOV.UK: Tax on your private pension contributions, annual allowance
12. HMRC Pensions Tax Manual PTM057100: tapered annual allowance
13. GOV.UK: Personal pensions
14. GOV.UK: Increasing normal minimum pension age
15. CRA: MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE
16. CRA: How contributions affect your RRSP deduction limit
17. CRA: Tax-free savings account (TFSA)
18. ATO: Concessional contributions cap
19. ATO: Personal super contributions
20. ATO: Division 293 tax on concessional contributions by high-income earners

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