Limited company pension contribution calculator

Can I use this calculator in an AI assistant?

Yes. Taxley runs a free Model Context Protocol (MCP) server, so you can add these calculators to Claude, ChatGPT or your own code and ask for a figure in plain English. The assistant gets the same answer as this page, with a link back to the result. There's no key and no sign-up.

How much tax does a company pension contribution save?

In the calculator's worked example, a company with £60,000.00 of profit pays £10,000.00 into its director's pension in 2026/27. All £10,000.00 reaches the pension and the company saves £2,650.00 of Corporation Tax. The same money as salary leaves £6,260.87, or £6,559.87 as a dividend.

£10,000.00 of company money	Tax and National Insurance now	Ends up with the director
Employer pension contribution	£0.00	£10,000.00 in the pension
Extra salary of £8,695.65	£3,739.13	£6,260.87 in cash
Extra dividend of £7,350.00	£3,440.13	£6,559.87 in cash

The example director already takes a £12,570.00 salary and £25,000.00 of dividends, and is the company's only employee. The pension puts £3,440.13 more to work than the dividend, but the money is locked away until you can draw it, and it is taxed then.

Is a pension contribution an allowable expense for a limited company?

Yes, if it is paid wholly and exclusively for the business. HMRC accepts this where the director's whole pay package, pension included, is in line with what an unconnected person doing the same work would get. The deduction is for the accounting period in which the company actually pays the money, not when it is accrued.

Sources: HMRC manual BIM46035: controlling directors; BIM46010: timing of deductions; HMRC: no Income Tax or National Insurance on an employer contribution.

How much can a company pay into a director's pension?

Up to the annual allowance of £60,000 a year in 2026/27, which covers your own and your employer's contributions together. Unused allowance from the previous 3 tax years can be carried forward. The allowance tapers down, to no less than £10,000, for very high incomes, and is lower once you have flexibly accessed a pension.

Pension limits	2025/26	2026/27
Annual allowance	£60,000	£60,000
Taper starts above threshold income of	£200,000	£200,000
and adjusted income of	£260,000	£260,000
Lowest tapered allowance	£10,000	£10,000

Sources: GOV.UK: annual allowance; HMRC: pension schemes rates and allowances.

When can you take money out of a pension?

Most pension schemes let you start taking money from age 55. You can usually take up to 25% of the pot as a tax-free lump sum, and the rest is taxed as income when you draw it, so the saving depends partly on your tax rate in retirement. Until then, the money can't be used for anything else.

Sources: GOV.UK: early retirement and your pension; GOV.UK: tax when you get a pension.

How does this pension calculator work?

Enter the amount, the company's profit and what you already take. The calculator works out the Corporation Tax the contribution saves, then turns the same company money into the biggest salary it pays after employer National Insurance, and into a dividend after Corporation Tax, and shows the extra tax on each on top of your existing income.

• Tax years: 2025/26 and 2026/27, with every rate checked against GOV.UK. The company's year is taken as 1 April to 31 March.
• Corporation Tax comes from the same engine as our Corporation Tax calculator, with the small profits rate and marginal relief.
• To choose between salary and dividends for the rest of your pay, use the salary vs dividends calculator or read our guide salary or dividends: how should a director pay themselves?
• Taking money out of the company in other ways makes a director's loan: the director's loan s.455 tax calculator shows what that can cost.

This is general information, not tax or pensions advice. The contribution goes into the company's accounts and its Company Tax Return (CT600) for the period in which it is paid.

Which rules does this calculator follow?

Every figure comes from the rules HMRC and Companies House publish on GOV.UK, and from the legislation behind them. The links below go to the pages we checked when we last reviewed this calculator, so you can read each rule in full and check that it applies to your company.

• HMRC Business Income Manual BIM46035: pension contributions for controlling directors, wholly and exclusively
• HMRC Business Income Manual BIM46010: pension contributions, timing of deductions
• HMRC: Salary sacrifice for employers (an employer contribution to a registered pension scheme carries no Income Tax or National Insurance)
• GOV.UK: Tax on your private pension contributions, annual allowance
• HMRC: Pension schemes rates and allowances
• GOV.UK: Tax when you get a pension, what's tax-free
• GOV.UK: Early retirement, personal and workplace pensions
• HMRC: Rates and thresholds for employers 2026 to 2027
• GOV.UK: Tax on dividends
• GOV.UK: Corporation Tax rates and reliefs

Frequently asked questions

Are employer pension contributions tax-deductible for a limited company?

Yes, when they are paid wholly and exclusively for the business. HMRC accepts a director's contribution where the whole pay package, pension included, is comparable with what an unconnected person doing the same work would get. The company deducts the contribution in the accounting period in which it actually pays it, which saves Corporation Tax at the company's top rate on that slice of profit: 19%, or 26.5% in the marginal relief band.

Is there National Insurance on employer pension contributions?

No. An employer contribution to a registered pension scheme carries no Income Tax or National Insurance for the director, and no employer National Insurance for the company, so the full amount goes into the pension. The same money paid as salary would carry employer and employee National Insurance and Income Tax.

What is the pension annual allowance for 2026/27?

It is £60,000 a year, covering your own and your employer's contributions together. Unused allowance from the previous 3 tax years can be carried forward. It tapers down to no less than £10,000 for very high incomes, and the money purchase annual allowance is £10,000 once you have flexibly accessed a pension.

Can my company pay into my pension if I take a small salary?

Yes. The limit of 100% of your earnings applies to tax relief on your own contributions, not to your employer's, so a company can contribute more than your salary. The contribution still counts towards your annual allowance, and HMRC can challenge the deduction if your whole pay package is out of line with the work you do.

Is a pension contribution better than a dividend?

For money you don't need now, usually yes for tax. The company saves Corporation Tax on a pension contribution, while a dividend is paid from profit after Corporation Tax and is then taxed above the dividend allowance. But pension money is locked away, usually until 55, and only part of it, usually up to 25%, can be taken tax-free; the rest is taxed as income.

When does the company get tax relief on a pension contribution?

In the accounting period in which the company actually pays the contribution to the pension scheme. An amount accrued in the accounts but paid after the year end is relieved in the later period instead. A very large jump in contributions from one period to the next, over 210% and £500,000 or more, must be spread over several years.

Related free tools

• Corporation Tax calculator: Estimates the Corporation Tax a UK limited company pays on its taxable profits for one accounting period of up to 12 months. Applies the small profits rate, the main rate and marginal relief, with associated companies, short periods and periods that straddle 1 April. A close investment-holding company pays the main rate on all its profits. Returns the tax, the effective rate and the payment and filing dates.
• Corporation Tax deadline calculator: Works out a UK private limited company's Corporation Tax payment date, CT600 filing deadline and Companies House accounts deadline from its accounting period. Accounts longer than 12 months are split into two Corporation Tax periods, each with its own payment date.
• Corporation Tax late filing penalty and interest calculator: Works out HMRC's penalties for filing a UK company's Company Tax Return (CT600) late — the flat £200/£400 penalties for filing deadlines from 1 April 2026 (£100/£200 before then), and the 10% or 20% tax-geared penalty — plus late payment interest on the Corporation Tax at HMRC's published rates.
• All free Corporation Tax tools

Last reviewed 15 October 2026. This calculator gives general guidance, not tax advice.