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Efficient & Effective- Pension contributions via Ltd Company

20 September 2023

As a director of a limited company, you can contribute pre-taxed company income to your pension pot. What's more, because an employer contribution counts as an allowable business expense, your company will also receive tax relief against corporation tax. 

Can I contribute to my pension via my limited company?

The short answer is yes – in fact, pension contributions are among the few remaining tax breaks available to limited companies. Putting money into your pension isn't only about saving for your retirement but is also a tax-efficient way of using profits from your business.

As a company director of your own limited company, you're able to contribute to your director's pension both as a business as employer contributions and as an individual. And it's possible to claim pension tax relief on both.

However, contributing to your limited company is usually more tax-efficient than contributing your funds as an individual because you'll reduce your company's taxable profits and, therefore, your corporation tax liability.

How much can my company contribute to my pension as a company director?

There are limits to the amount you can pay into your pension and still receive tax relief. The limit is currently a maximum of £60,000 or 100% of your income, whichever is lower – known as the pension annual allowance.

If you have a large amount you'd like to contribute, you may be able to benefit from the 'carry forward' rule. This lets you make use of annual allowances that haven't been used over the previous three years, as long as you've been a part of a registered pension scheme during this time.

This information was correct on the date it was written but should not be relied upon to make important financial decisions. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of pensions and investments including the income they produce can go down as well as up and you may not get back the full amount that you originally invested