The owner of a small shop working alone behind the counter

The automatic enrolment exemption for sole-director companies

The Pensions Regulator confirms that a company with a sole director and no other staff has no automatic enrolment duties at all. The earnings trigger and qualifying earnings band for 2026/27 were confirmed unchanged on 18 December 2025, but none of those figures apply until the company takes on its first member of staff.

7 min read · 13 October 2026 · Altro Partners, by Equity & General

£10,000
the automatic enrolment earnings trigger confirmed for 2026/27
DWP, 18 December 2025
Reacting to

Automatic enrolment earnings trigger and qualifying earnings band 2026/27 (written ministerial statement, Pensions Minister Torsten Bell, 18 December 2025)

Each December the Department for Work and Pensions confirms the earnings figures that decide who an employer must assess for a workplace pension in the tax year ahead. On 18 December 2025 the Pensions Minister confirmed the 2026/27 figures are unchanged from the year before. None of those figures decide anything for a company with one director and no other staff, because the Pensions Regulator's own guidance puts that company outside automatic enrolment altogether.

What the regulator confirmed

The Pensions Minister, Torsten Bell, confirmed the figures for 2026/27 in a written statement to Parliament on 18 December 2025.

£10,000
the annual earnings trigger for automatic enrolment, unchanged for 2026/27.
£6,240
the lower earnings limit of the qualifying earnings band, unchanged for 2026/27.
£50,270
the upper earnings limit of the qualifying earnings band, unchanged for 2026/27.

DWP, written ministerial statement by Pensions Minister Torsten Bell, 18 December 2025

None of these three figures has to be applied by a company whose only director has no employment contract and who has no other staff, or whose only director with a contract has no other staff alongside them. The Pensions Regulator's guidance for directors sets out both positions: that company has no automatic enrolment duties at all, this year or any year, for as long as its staffing stays the same.

Where the exemption shows in the client list

A company with a single person listed as director is visible from the officer list Companies House already holds and the firm's own payroll records. Client Watch, reading a firm's client list against Companies House, shows which companies have only one director. The absence of an employer pension contribution across several years of filed accounts is already in the file the firm prepares. Neither fact says anything on its own about whether a director has personal pension provision elsewhere. It is a reason to ask the client about their position.

Other places dependence and gaps show up in a set of accounts are set out in what to look for in the accounts.

A sole trader checking paperwork in his own workshop
Torsten Bell, Pensions Minister, written ministerial statement, 18 December 2025: “The earnings trigger will remain at £10,000. The lower earnings limit of the qualifying earnings band will remain at £6,240. The upper earnings limit of the qualifying earnings band will remain at £50,270.”

A worked example

This example uses a made-up company and made-up figures.

A one-person design studio, incorporated in 2017, has one director and no other staff. Turnover for the year is £142,000 and net profit before tax is £68,000. The director takes a salary of £12,570 and dividends of £54,000, and the company retains £40,000 in cash at the year end. No employer pension contribution has been made in nine years of trading.

The design studio

Made-up company and made-up figures

Turnover£142,000
Net profit before tax£68,000
Director’s salary£12,570
Dividends taken£54,000
Cash retained in the company£40,000

The company has met every automatic enrolment duty it has, because it has none. Nothing has required the £40,000 to be considered for a pension at all. An employer contribution is deductible where it meets the wholly and exclusively test and is reasonable for the work the director does, under HMRC’s Business Income Manual BIM46035, and sits within the £60,000 annual allowance before any taper applies. Whether to make a contribution, and how much, is a decision for the director and the Equity & General financial planner. Having no automatic enrolment duties does not answer that question.

Accountancy work

Seeing that a company has one director, no other staff, and no employer pension contribution recorded across several years of accounts is professional reading of the file the firm already prepares.

Regulated advice

Working out how much the company could contribute, how it interacts with the director’s annual allowance, and recommending a pension sits with the Equity & General financial planner.

The division between the two is set out in who does what.

The employer contribution a sole-director company is free to make

The wholly and exclusively test in HMRC’s Business Income Manual BIM46035 governs whether an employer pension contribution is deductible against the company’s profits; the contribution has to be reasonable for the work the director does. The annual allowance is £60,000, tapering where threshold income is over £200,000 and adjusted income is over £260,000, down to a minimum tapered allowance of £10,000. Unused allowance from the previous three tax years can be carried forward, with the oldest year dropping out each 6 April. None of this depends on whether the company has automatic enrolment duties. A company exempt from automatic enrolment can still make an employer contribution in any year it chooses to.

The FCA’s Financial Lives 2024 survey found that 8.6% of UK adults, and 13% of self-employed adults, had taken regulated financial advice in the previous twelve months. A sole director is neither category exactly, but the accounts the firm prepares are often the only annual record of whether the company has ever made a pension contribution for that person. Surplus cash sitting in a company, and what it might be used for, is set out more fully in surplus cash held in a client’s company. The wider figures on who takes advice are on the advice gap.

Two checks to run this week

  1. List clients whose only director has no other staff. Cross-reference the officer list already in the client’s Companies House record against the payroll, and note how many years of filed accounts show no employer pension contribution.
  2. Confirm the company has told the Pensions Regulator it has no duties. A company that has never replied to a Pensions Regulator letter can still receive compliance correspondence even though it owes no action; the online form confirming “not an employer” status takes a few minutes to complete.

What is not yet settled

The Pensions (Extension of Automatic Enrolment) Act 2023, which received Royal Assent on 18 September 2023, gives ministers power to remove the £6,240 lower earnings limit and lower the automatic enrolment age from 22 to 18, with implementation targeted for 2026. The DWP’s 18 December 2025 statement confirmed only the existing figures and set no commencement date for those wider changes. If they do commence, a sole-director company with no other staff stays outside automatic enrolment regardless, because the exemption turns on who is on the payroll, not on where the earnings thresholds sit.

Common questions

Does a company with one director have to set up a workplace pension?

Not if the company has only one director and no other staff. The Pensions Regulator’s guidance for directors says a company has no automatic enrolment duties where the only director has no employment contract, or where exactly one director has a contract and there is no other person on the payroll. This applies every tax year the position stays the same, including 2026/27, for which the earnings trigger and qualifying earnings band were confirmed unchanged on 18 December 2025. The company does not need to assess the director against those figures, declare compliance, or write to anyone unprompted. If the Pensions Regulator writes first, the company should complete the online form confirming it is not an employer with automatic enrolment duties.

What happens if the company takes on its first employee?

Automatic enrolment duties start from that person’s first day, as soon as a second person who is not a director, or a second director, holds an employment contract alongside the existing one. The company then has to assess that person against the earnings trigger, currently £10,000 a year, and enrol them if they are eligible, using the qualifying earnings band confirmed for 2026/27 at £6,240 to £50,270. The duty applies to the new member of staff; it does not apply retrospectively to a sole director who was previously exempt. The Pensions Regulator should be told the position has changed as soon as it happens, not left until the next piece of correspondence arrives.

Does the exemption mean a sole director should not have a pension?

No. The exemption removes a legal duty on the company; it says nothing about whether a pension is a good use of the company’s money for that director. A company can choose to make an employer pension contribution for its sole director at any time, whether or not automatic enrolment applies, provided the contribution meets the wholly and exclusively test and is reasonable for the work the director does, under HMRC’s Business Income Manual BIM46035. Whether to make a contribution, how much, and how it sits against the director’s annual allowance is a decision for the director and the Equity & General financial planner, not something the exemption settles either way.

What does the firm need to tell the Pensions Regulator?

Nothing, unless the Pensions Regulator writes to the company first. A company that meets the sole-director conditions has no automatic enrolment duties and no ongoing form to file. If a letter does arrive, usually prompted by the company’s first PAYE registration, the online form confirming the company is not an employer with automatic enrolment duties takes a few minutes and uses the 10-digit letter code the Pensions Regulator sends by post. The confirmation needs repeating if the Pensions Regulator asks again, and the position needs reporting as soon as it changes, such as when the company takes on its first member of staff.

Why does this matter for financial planning, and not only for automatic enrolment compliance?

Because the exemption is about a legal duty, not about whether the director has adequate pension provision. The FCA’s Financial Lives 2024 survey found that 8.6% of UK adults, and 13% of self-employed adults, had received regulated financial advice in the previous twelve months. A sole director with no employer pension contribution recorded in the company’s accounts is, on those figures, unlikely to have had that conversation with a financial planner either. The accounts the firm already prepares show whether a contribution has ever been made; raising that with the client, and offering an introduction to the Equity & General financial planner, is within what the firm can do. Deciding what the company should contribute is not.

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