Government move on PRSA loophole ‘leaves short window’ for business owners

Business owners have been warned that the Government’s move this week to clamp down on a loophole on contributions to personal retirement savings accounts (PRSAs) leaves a “short window” for them to maximise tax-efficient payments.
The Finance Act 2022 removed the benefit-in-kind (BIK) treatment of employer contributions to employee’s PRSA. BIK is ordinary treated as taxable income.
That policy change was widely utilised as a method for business owners to strengthen their retirement savings.
However, the Finance Bill 2025, published on Thursday, has placed a limit on employer contributions from a BIK-exemption perspective to 100 per cent of income drawn from the business in the same year.
“It seems there is a short window over the next few weeks for owner-directors to consider large lump sum contributions to their pension pots. It’s likely the new limits will be in effect from January 1, 2025,” said Feargal McKenna, head of corporate at Moneycube, an online platform for investments, savings and pensions.
“For entrepreneurs, particularly those with fluctuating incomes, now is the time to act if you want to move the dial on your retirement wealth, and maximise tax savings to your company and yourself.”
“Once the changes in the Finance Bill take effect, large lump sum contributions to pensions will not be fully tax deductible for companies, and will be taxed as benefit-in kind for the individual.”
Fergal Roche, a financial planning manager with Davy Private Clients, said the Government’s move will affect business owners who may be drawing relatively lower salaries and often make larger irregular pension contributions due to business cashflows needs.
“Impacted individuals should now review their plans, whether it’s utilising the current PRSA rules before they change or consider using an occupational pension scheme such as a Master Trust for future retirement savings,” Mr Roche said. “The capacity to make company pension contributions may be much larger in a Master Trust than through a PRSA under the proposed new rules.”