Company or Personal Pension Contributions?

Are you wondering which is best, company or personal pension contributions – particularly if you’re a business owner?

If you own your own business you probably know that it’s usually good company and personal tax planning to pay profits into your pension fund.

If you’ve got personal cash surplus to requirements, and you’re a higher rate tax payer, a personal pension contribution might be the best route for you.

But in our experience, many business owners have more cash in their business account than their personal accounts.

And they’re usually paying themselves a low salary and topping up with dividends.

How Company Pension Contributions Work

As explained in our popular article Dividends and Pensions personal pension contributions are limited to 100% of salary and you can’t take dividends into account.

The company on the other hand, can pay a pension contribution that is more than your salary, you just need to make sure that you stay within your Annual Allowance.

The Annual Allowance is £40,000 for the 2018/19 tax year ending 5th April 2019.

Unlike salary, pension contributions are exempt from employer (13.8%) and employee (12%) National Insurance. They don’t get classed as a taxable benefit either.

Do you Qualify for the standard Annual Allowance?

If you’re on a higher income (£100,000 or more) it’s important to check that qualify for the full Standard Annual Allowance.

Our article on the Tapered Annual Allowance will help you with this.

The Money Purchase Annual Allowance could also apply if you’ve already taken some flexible benefits from your pension fund. This would reduce your maximum contribution to £4,000.

Carry Forward

In some circumstances it might be possible to use the carry forward unused allowance. This which would enable your company contribution to be higher than the standard Annual Allowance.

Reduce your Company’s Corporation Tax

Your company pension contribution will usually qualify as an allowable business expense, which means you can set it against your profits and get corporation tax relief.

To qualify for relief, the contribution must be accepted by HMRC (HM Revenue & Customs) as ‘wholly and exclusively’ for the purpose of the business. Not simply for tax savings.

If you are unsure you should ask your accountant to advise you on this.


Call 0117 290 0370 if you’d like to find out more about how we work with business owners. Ask to book a free 20 minutes telephone consultation with Hilary Carden.

Alternatively drop us an email to:

More Reading:

What is the Tapered Annual Allowance?
Dividends and Pensions
What is Carry Forward?

Important Risk Warnings:

This article and the information on this website is not personal advice. It’s only intended to give you a brief summary or highlight a particular issue for you to investigate further. It is based on our current understanding of legislation and HMRC guidance which can change. Correct as at January 2019. If you’re in any doubt whether a particular course of action is suitable for your circumstances, you should seek professional advice. Tax rules can change and any benefits depend on individual circumstances. And, if you are unsure any reliefs are applicable to you, you should consult your accountant or HMRC.

The value of investments and any income from them can fall as well as rise, so you could get back less that you put in. Past performance is not a guide to the future. It cannot provide a guarantee of the future returns of a fund.

Last edited: January 2019

  • Hillary Carden

    Hilary is a force to be reckoned with in the pensions field. She founded Cardens in 1993 and Cardens Pension Trustees Ltd in 1995 and became one of the first women to become a Registered Life Planner® and with 30+ years experience of advising on and managing pension schemes, she really is an expert in retirement and financial planning.

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