Sunny Bharj
Independent Financial Adviser
Tony Springer
Independent Financial Adviser
A limited company can pay into a director's pension and deduct the payment from its profits for corporation tax.
If you run a limited company, the company can pay into your pension. It claims the payment as a business expense, no National Insurance is due on it, and nothing is taxed on you personally.
Your own contributions are capped by your earnings, so a director on a small salary and large dividends has very little room. A company contribution is not capped by your earnings.
gov.uk and HMRC Pensions Tax Manual, checked 23 September 2026. 2026/27 rates. The Budget on 28 October 2026 left them unchanged for 2027/28.
Relief is given for the period in which the contribution is paid, so a contribution accrued in the accounts and paid later lands in the later year.
A small self-administered scheme is an occupational pension scheme an employer sets up for its own people, most often the directors of a family company. What makes it different from a personal pension is what it can do with the money: hold the trading premises, and lend back to the sponsoring company.
The tax rules place no restriction on what a pension scheme may invest in. They impose tax charges on the assets they discourage, such as residential property, and those charges are severe.
The limit of 100% of earnings applies only to contributions you make yourself.
The loan cannot exceed 50% of the scheme's cash plus the net market value of its assets, measured immediately before the loan is made.
Security is a first charge, for the whole term, over an asset worth at least the loan plus the interest.
At least one percentage point above the average base lending rate of six named high street banks, rounded up to the nearest quarter point. It is set by regulations and resets monthly, so the rate is whatever the formula gives at the time.
Maximum term of five years. If anything is still outstanding it can be rolled over once.
Repayment has to be in equal instalments covering both, for each complete year. An interest-only loan fails the test.
Miss any one of the five and the whole loan is an unauthorised payment: 40% on the borrower, a possible further 15% surcharge, and a scheme sanction charge on the administrator.
From 6 April 2029 only the first £2,000 a year stays free of National Insurance. Income tax relief does not change.
Read more →The Budget on 28 October 2026 kept the cash ISA limit at £20,000, raised the tax on savings interest from April 2027 and cut the Business Asset Disposal Relief limit to £500,000. Pensions still come into inheritance tax on 6 April 2027.
Read more →Yes. A limited company can pay into a director's pension and deduct it as a business expense. No National Insurance is due on it, nothing is taxed on you, and the limit on your own earnings does not apply to it. The full answer.
Yes. A small self-administered scheme can lend to the employer that sponsors it, up to 50% of the fund, provided five conditions are all met. A SIPP cannot do this, and no registered scheme can lend to a member. The full answer.
The tax rules do not forbid it, and the charges that apply are severe. Residential property is taxable property, and buying it triggers charges on the member, on the scheme, and again every year it is held. The full answer.
A personal contribution and a company contribution are affected differently. Under relief at source, a pension provider adds 20% automatically whatever your income tax band, so a Scottish taxpayer on the intermediate, higher, advanced or top rate has to claim the rest back through Self Assessment, and the amount depends on Scotland's own bands for 2026/27. A contribution made by your company instead reduces the company's profits for corporation tax and is not added to your personal income under any part of the UK's income tax, so none of this applies to it. The full answer.
Up to the annual allowance, currently £60,000 unless the taper reduces it, plus any unused allowance carried forward from the three previous tax years. Unlike your own contributions it is not limited by your salary, though it does have to be justifiable as part of your remuneration package.
For money you do not need now, it is often more tax-efficient. A dividend is paid out of profit that has already borne corporation tax and is then taxed again in your hands. A pension contribution is deducted before corporation tax and is not taxed on you at all. What you give up is access until at least 55, rising to 57 in 2028.
Where they are a genuine employee of the company, and the overall package is commercially justifiable, yes. A contribution into the pension of a director's family member who is not an employee is taxable on the director as earnings.
A SSAS is used mainly where the scheme will own the trading premises or lend to the company. For contributions alone, a personal pension or a SIPP involves less administration.
Commonly, yes, and it is one of the main reasons directors use a SSAS or a SIPP. The company then pays rent to the scheme, which is a deductible expense for the company and grows the pension. The rent has to be commercial.
Nothing automatically. The pension is separate from the company and is not part of the sale. Where the scheme owns the premises or has lent to the company, the sale has to deal with that, which is a reason to raise it early.
Pension benefits and their tax treatment depend on your circumstances and on current rules, which can change. The Financial Conduct Authority does not regulate tax advice. Figures are 2026/27.
The same company profit paid into your pension, as salary or as a dividend, and what each route leaves you after tax.
Work it out →Twenty statements about money that sort into four patterns, with a written report on the pattern your answers fit.
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