The three ways to take money out
An employer pension contribution is paid by the company. It is normally deductible for corporation tax. No national insurance is due on it, and you pay no income tax when it is paid in. You cannot draw the money until the normal minimum pension age, which is 55 now and 57 from 6 April 2028 (Finance Act 2022).
Figures on this sheet are for the 2026/27 tax year.
The annual allowance
The annual allowance caps the total paid into your pensions each tax year with tax relief, counting your own and the company’s contributions together. For 2026/27 it is £60,000 (gov.uk, Tax on your private pension contributions).
The allowance is reduced for higher earners. For 2026/27 the taper applies where threshold income is over £200,000 and adjusted income is over £260,000, and it can reduce the allowance to £10,000 (gov.uk, Tax on your private pension contributions; HMRC Pensions Tax Manual PTM057100). A large dividend, a property sale or a one-off bonus can take you over those figures in a single year.
Carry forward
Unused annual allowance from the three previous tax years can normally be used as well, provided you were a member of a registered pension scheme during those years (gov.uk, Tax on your private pension contributions).
Each 6 April the oldest of the three years drops out and cannot be used afterwards.
An example
The owner in this example is made up. They have run a profitable company for eight years and have paid nothing into a pension. An old workplace pension has stayed open, so they were a member of a registered scheme throughout. In 2026/27 they can use this year’s £60,000 plus any unused allowance from 2023/24, 2024/25 and 2025/26, which were £60,000 each, so up to £240,000 in total if the taper did not apply in any of those years. On 6 April 2027 the 2023/24 year drops out.
The test a company contribution has to pass
For the company to deduct the contribution against its profits, the payment has to be wholly and exclusively for the purposes of the trade. HMRC looks at whether the total package of salary, bonus, benefits and pension is reasonable for the work you do for the company (HMRC Business Income Manual BIM46035).
HMRC can refuse the deduction for a contribution that is out of proportion to the work you do for the company. Your accountant can look at this.
Pensions and inheritance tax from April 2027
For deaths on or after 6 April 2027, most unused pension funds and death benefits count as part of your estate for inheritance tax (Finance Act 2026; HMRC technical note, Inheritance Tax on pensions, 11 May 2026). A financial adviser can review plans made on the basis that a pension sits outside the estate.
Questions and answers
Can the company pay in more than I earn?
Employer contributions are not capped by your salary in the way personal contributions are. They are limited by the annual allowance and by the wholly and exclusively test.
Is it better for the company to pay than for me to?
The tax treatment is different. A company contribution is paid before corporation tax and carries no national insurance. A personal contribution is paid from income you have already been taxed on, and tax relief is then added, up to the limit of your earnings. Which suits you is a question for a regulated financial adviser.
What if I want to stop work before the minimum pension age?
Money in a pension cannot normally be drawn before that age. A financial adviser can look at how your income before that age would be funded.
Can old workplace pensions be combined?
Some older schemes carry guarantees or protected benefits that are lost on transfer. Combining pensions is regulated advice, and a financial adviser has to look at each scheme before advising on it.
