When it comes to pension planning, many business owners and directors are unsure whether to contribute personally or via their limited company. The good news is, both options come with tax advantages - but they work quite differently. Here’s what you need to know:
Contributing to a Pension via Your Limited Company
If you run a limited company, your company can make pension contributions on your behalf - and this is often more tax-efficient than taking the money as salary or dividends and then contributing personally.
Key Benefits:
Tax-deductible expense: Employer contributions are treated as an allowable business expense, which means the company can deduct the cost from its profits when calculating Corporation Tax.
Save up to 25% in Corporation Tax if your profits exceed £50,000.
Reducing profits through pension contributions could even bring you below the £50k threshold, potentially avoiding the higher rate of Corporation Tax altogether.
No National Insurance (NI) on employer contributions - unlike salaries.
Example:
If your company contributes £10,000 to your pension, it could save up to £2,500 in Corporation Tax. That’s a direct saving for the business.
Contributing to a Pension Personally
You can also make pension contributions from your own personal funds, for example, from your salary or dividends.
Key Benefits:
You receive Income Tax relief on personal contributions.
Most providers reclaim 20% tax relief automatically. So, if you pay £80, the government adds £20 — making it a £100 contribution.
If you're a higher or additional rate taxpayer, you can claim even more relief (an extra 20% or 25%) by completing a Self Assessment or contacting HMRC directly.
Example:
A higher-rate taxpayer contributing £1,000 to a pension could ultimately pay just £600–£800, depending on how they reclaim the relief.
So... Which Route Is Best?
If you're a director of a limited company: Contributing via the company is usually the more tax-efficient route, particularly if you want to lower your Corporation Tax bill.
If you have personal income from other sources, or your company’s profits are low, personal contributions might still make sense - especially if you can claim higher-rate tax relief.
Can You Do Both?
Yes! You can combine company and personal pension contributions, as long as you don’t exceed your annual allowance (typically £60,000 for most people in the 2024/25 tax year).
Ready to Make Your Pension Work Harder for You?
We’ll help you understand the best way to contribute - and how to maximise tax relief whether you’re drawing salary, dividends, or a mix of both.
Let’s talk about what makes sense for your setup.
Send us an email at info@property-tax-advice.co.uk, or give us a call on 01249 816 810 today. 📩
FAQs
Can I contribute to a pension from both my company and personally?
Yes. You can make both company and personal contributions, as long as you stay within your annual allowance (usually £60,000). Just make sure the combined total doesn’t go over the limit.
What’s the tax benefit of paying into my pension through my limited company?
Company contributions are a business expense, so they reduce your profits and lower your Corporation Tax bill. No National Insurance to pay either, which makes it more efficient than taking the money as salary or dividends first.
Do I still get tax relief if I pay into my pension personally?
Yes. Most pension providers claim 20% tax relief automatically. If you’re a higher or additional rate taxpayer, you can claim even more via your Self Assessment tax return.
What counts towards my pension annual allowance?
All contributions, both from you and your company, count towards the allowance. Going over the limit could mean a tax charge, so it’s worth keeping an eye on the numbers.
Can my company contribute even if I’m not taking a salary?
Yes - but HMRC may question whether it’s a genuine business expense if you’re not actively working in the business. It’s a grey area, so get professional advice before making contributions in this situation.
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