Pension contributions from your limited company

Personal pension contributions can be tax-efficient

When you pay into your pension, you usually receive tax relief at your marginal rate of Income Tax. Usually, basic rate taxpayers get a 25% tax top up. So when you pay £100 into your pension, the government adds £25, bringing the total contribution to £125. Higher and additional rate taxpayers can claim further relief, typically through Self-Assessment.

There’s no limit to the amount you can pay into your personal, self-employed, or contractor pension. But there is a limit on the gross amount that can be saved into a pension each tax year without facing tax charges. This is the ‘annual allowance’. 

The current standard annual allowance for pension contributions is £60,000 (2025/26) - this includes personal, employer, and any third party contributions.

There’s a separate limit on tax relief. You can receive tax relief on personal and third party contributions up to 100% of your relevant earnings, capped at £60,000 per year, whichever is lower (2025/26). You don’t receive tax relief on employer contributions.

If you earn £3,600 a year or less, you can usually contribute up to £3,600 to your pension (including government tax relief).

Note that if you’re a high earner or you’ve already flexibly accessed your pension, your annual allowance may be lower.

Making pension contributions as the director of a limited company

Limited company directors have two options for contributing to a pension:

1. make personal contributions from your earnings; or
2. make employer contributions directly from the company.

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Personal pension contributions for limited company directors

Limited company directors can make personal pension contributions as explained above. These contributions may attract tax relief. However, your tax-efficient contributions depend on the salary you take from your business.

If you take both salary and dividends, the dividends don’t count as ‘relevant UK earnings’. Only the amount of money you take as income counts towards your pension tax relief limit.

So, if you take a small salary and a large dividend from your company, your pension tax relief limit will be low. If you then exceed your limit, you’ll face tax charges.

Drawing a greater salary can increase the amount of money you can pay into your pension while still benefiting from tax relief. Bear in mind this could increase your Income Tax and National Insurance (NI) bill.

Alternatively, you could make the pension contribution straight from your company.

Making employer pension contributions directly from your limited company

Your limited company can contribute pre-taxed company income directly to your pension. As these are employer contributions, they offer two key benefits.  

Firstly, employer contributions don’t attract personal tax relief. As a result, they’re not limited by the tax relief limit of 100% of your earnings (capped at £60,000, 2025/26). So, although they’ll count towards your annual allowance, you’ll be able to pay in above your total salary.

Secondly, employer contributions are still tax-efficient. But rather than attracting personal tax relief, the tax efficiency benefits the business.

Employer contributions can count as an allowable business expense. This means you can subtract them from your taxable profit, cutting the Corporation Tax you have to pay as a result. That could save your company up to 25% in Corporation Tax.

Your employer pension contributions must meet the company pension rules for allowable deductions. These state that the contributions must be ‘wholly and exclusively’ for business purposes. To work this out, HMRC looks for certain evidence. For example, that might be whether other employees are receiving comparable remuneration packages.

Furthermore, employers don’t have to pay NI on pension contributions. The main employer NI rate for 2025/26 is 15%. So, by contributing directly into your pension rather than taking it as salary, you could save up to 15%.

In total, your company can save up to 40% by paying money directly into your pension, rather than drawing those earnings as salary. Of course, this will depend on your individual circumstances.

It can be sensible to speak to your company accountant before making any decisions about your business.

Limited company director pension contributions in summary

Making employer contributions into your PensionBee pension

If you’re the director of a company and you have a PensionBee pension, you can set up a limited company contribution. You can also make personal contributions to your pension. 

Just select the contributions tab in your online account (your ‘BeeHive’). Find out more about pension contributions.

Benefits of using PensionBee to manage your self-employed pension

You can open a PensionBee personal pension whether you’re employed or self-employed. Like all personal pensions, it’s a defined contribution pension. That means what you have when you retire depends on what's paid in (including tax relief) and investment performance. When signing up, you can choose from a range of plans depending on your savings needs.

PensionBee’s self-employed pension offers some useful benefits:

• you can manage your savings online or from the PensionBee app;
• you can set up regular contributions or add one-off payments; and
• we charge one simple annual fee.

If you’ve never saved into a pension before, you can start one with PensionBee. Sign up for a self-employed pension now.

Risk warning

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 10-03-2026