Last reviewed: 29 September 2026 · Reviewed by IFM's qualified accountant
Pension money is normally locked away until pension-access rules allow benefits to be taken. A contribution should therefore follow cash-flow and retirement planning, not be made only because the year end is approaching.
What should you know about employer and personal contributions differ?
An employer contribution is paid by the company to the pension scheme. It is not limited by the director's relevant UK earnings in the same way as tax-relieved personal contributions, although the annual allowance and other pension rules still apply.
A personal contribution is paid by the individual, often under relief-at-source or net-pay arrangements. Tax relief is normally constrained by relevant earnings and the contribution method. Dividends are not relevant earnings for this purpose.
Keep the two routes separate in the records. A company bank payment should be supported as an employer contribution; a personal payment should not be relabelled later without the provider's agreement and correct processing.
What should you know about corporation Tax relief?
Employer pension contributions can be deductible when incurred wholly and exclusively for the trade. For a director-shareholder, HMRC can consider the total remuneration package — salary, benefits and pension — and whether it is commercially reasonable for the work performed.
There is no rule that every contribution below the annual allowance is automatically deductible. A very large payment for a director with limited duties, a non-working family member or a company with no commercial rationale may need closer review.
Relief is generally linked to payment, not merely an unpaid accrual. If timing matters for the company accounting period, ensure cleared payment reaches the scheme by the intended date and retain the provider confirmation.
What should you know about the 2026/27 annual allowance?
The standard pension annual allowance is £60,000 for 2026/27. It measures pension input across all the individual's registered pension arrangements, including employer and personal defined-contribution payments and the calculated growth in defined-benefit rights.
It is not a simple company contribution limit. A director with another employment, a public-sector pension or personal contributions must combine all pension inputs for 2026/27.
Unused annual allowance can potentially be carried forward from the previous three tax years. The person must have been a member of a registered pension scheme in the year from which allowance is carried. Current-year allowance is normally used first, then available earlier years in order.
Carry-forward calculations must use the allowance and pension input for each historic year. Keep statements from every scheme rather than estimating from cash paid.
What should you know about high income and the taper?
For 2026/27, the tapered annual allowance can apply where both threshold income is over £200,000 and adjusted income is over £260,000. Adjusted income broadly brings employer pension input into the calculation; threshold income has its own statutory adjustments.
Where the taper applies, the annual allowance is reduced by £1 for every £2 of adjusted income above £260,000, subject to a minimum tapered annual allowance of £10,000 for 2026/27. Do not decide taper status using salary alone.
A large company contribution can itself increase adjusted income and push the individual into a reduced allowance. Model the contribution before payment when income is near either threshold.
What should you know about money purchase annual allowance?
If the director has flexibly accessed defined-contribution pension benefits, the money purchase annual allowance may apply. It is £10,000 for 2026/27. Trigger events are technical: taking certain flexible income or lump sums can trigger it, while some other withdrawals do not.
The MPAA does not carry forward. Where it applies alongside defined-benefit saving, an alternative annual allowance calculation can also be needed. Ask the provider for the flexibly-accessed statement and trigger date.
Do not assume retirement is years away merely because the director is still working. A past flexible withdrawal from another pension can materially limit the current contribution.
What happens above the allowance?
Pension input above the available annual allowance can produce an annual allowance tax charge on the individual. The charge broadly removes tax relief on the excess at the person's marginal rate; it does not usually make the contribution invalid.
The individual may need to report the charge through Self Assessment even if the pension scheme pays some or all under scheme-pays rules. Scheme-pays conditions and deadlines require separate checking.
A company Corporation Tax deduction and an individual annual-allowance charge are separate questions. One does not automatically cancel or prevent the other.
What should you know about salary sacrifice and remuneration?
Salary sacrifice involves changing the employment contract before the employee becomes entitled to cash pay. The company then makes an employer pension contribution. It is not achieved by journalling an already-earned bonus into pension after the entitlement arose.
For owner-directors, a direct employer contribution may be administratively clearer than sacrifice, but the company should still document the remuneration decision. Consider the effect of reduced contractual salary on borrowing, statutory payments, life cover and other benefits.
What should you know about cash flow and company solvency?
Pension contributions transfer cash permanently out of the company. Before payment, forecast Corporation Tax, VAT, PAYE, suppliers, finance payments and a prudent operating reserve. Distributable reserves are not the same as available cash, and a tax deduction does not fund the payment.
If the company is under financial pressure, directors must consider creditor interests and their legal duties. A large pension contribution to an owner-director shortly before insolvency can be scrutinised.
Use a rolling forecast and an approval minute stating the commercial rationale, contribution amount, provider and payment date.
What should you know about provider and investment questions?
Confirm that the scheme accepts employer contributions and will record them correctly. Check fees, investment choices, transfer restrictions, beneficiary nominations and access terms. Tax efficiency cannot rescue an unsuitable or excessively costly product.
Pension advice is regulated. Accountancy and tax modelling do not replace advice on the pension product, investments or transfer of safeguarded benefits.
If the company contributes for more than one employee, apply a coherent remuneration policy and check automatic-enrolment responsibilities separately.
What should you know about a practical year-end review?
Obtain pension input statements and list contributions already made in 2026/27. Review the previous three years for potential carry forward, test the taper and MPAA, estimate company profit and cash, and agree an amount with the pension provider and advisers.
Make the payment early enough to clear before the intended accounting date. Afterward, reconcile the company ledger to provider evidence and retain the board approval.
See limited company accounts and tax support for the relevant service page. Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What should you know about questions before authorising payment?
Confirm the director's total pension input for 2026/27, unused allowance for the preceding three years, taper position and whether the MPAA has been triggered. Ask the provider how it will record the payment and when cleared funds are treated as received.
For the company, confirm commercial reason, accounting-period timing, available cash and the effect on creditors. Record who checked the tax calculation and who advised on the pension product, because those are different professional questions.
Revisit the calculation if income, contributions or pension access changes before 5 April 2027. A valid review is dated and based on the position then known.
What should you read next?
Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What do people also ask about this topic?
What should you know about employer and personal contributions differ?
An employer contribution is paid by the company to the pension scheme. It is not limited by the director's relevant UK earnings in the same way as tax-relieved personal contributions, although the annual allowance and other pension rules still apply.
What should you know about corporation Tax relief?
Employer pension contributions can be deductible when incurred wholly and exclusively for the trade. For a director-shareholder, HMRC can consider the total remuneration package — salary, benefits and pension — and whether it is commercially reasonable for the work performed.
What should you know about the 2026/27 annual allowance?
The standard pension annual allowance is £60,000 for 2026/27. It measures pension input across all the individual's registered pension arrangements, including employer and personal defined-contribution payments and the calculated growth in defined-benefit rights.
What should you know about high income and the taper?
For 2026/27, the tapered annual allowance can apply where both threshold income is over £200,000 and adjusted income is over £260,000. Adjusted income broadly brings employer pension input into the calculation; threshold income has its own statutory adjustments.
Which official sources support this guide?
- https://www.gov.uk/tax-on-your-private-pension/annual-allowance
- https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates
- https://www.gov.uk/guidance/work-out-your-allowances-if-youve-flexibly-accessed-your-pension
General guidance, not advice for your situation.
