Slash your corporation tax with pension contributions

Want to cut your corporation tax bill while building your pension? Making pension contributions through your limited company is one of the most powerful tax-saving moves available to directors.

Why it works

• Fully tax-deductible – Contributions reduce taxable profits, cutting corporation tax.
• Significant tax savings – At a 25% tax rate, every £1 contributed saves up to 25p in tax.
• Boosts retirement wealth – Moves money into your pension tax-free instead of paying HMRC.

Supercharge savings with carry forward allowances

The annual pension allowance is £60,000, but if you haven’t used all of it in the last three years, you can carry forward unused allowances from any period in which you had a registered pension scheme open.

This allows for a much larger contribution in a single year, as shown below:

The maximum potential contribution

Key timing and planning considerations

• Use it or lose it
  - Unused allowances from 2021/22 must be used by 5 April 2025, or they will be lost.
  - Allowances are applied on a first-in, first-out basis, meaning the oldest is used first.
• Justifying pension contributions for tax relief
  - Must be wholly, exclusively, and necessary for the purposes of the business.
  - Commercially justifiable as part of the director’s total remuneration package.
  - Proportionate to the director’s role and duties to avoid HMRC scrutiny.
• Make payments on time
  - Contributions must be paid before your company’s year-end to qualify for relief in that period.
  - Simply committing to pay isn’t enough - the money must leave your company bank account.
• Tapered allowance rules
  - If total income exceeds £260,000, the annual pension allowance may reduce, limiting how much can be contributed.

Act now – don’t leave money on the table

A well-planned pension contribution slashes your tax bill and grows your wealth. Let’s structure your contributions before your year-end to maximise your tax relief. Get in touch today!