Running a limited company often means your personal and business finances are deeply intertwined. That is particularly true when it comes to retirement planning. Pension saving may not feel urgent against the pressures of payroll, tax deadlines and cashflow forecasting, yet directors who treat pensions as a last-minute afterthought can lose out on generous tax relief and long-term growth. By maximising pension contributions early and systematically, you convert company profits into a valuable, low-tax asset that works quietly in the background while you focus on the next contract or product launch.

Since the lifetime allowance was removed in April 2024, pension planning for 2025/26 is simpler but no less powerful. Employer contributions remain deductible against corporation tax at 25%, personal contributions attract relief at your marginal income tax rate, and the annual allowance still sits at £60,000. Accurately timing and structuring those payments can cut current tax, reduce future dividend exposure, and boost the eventual size of your pension pot. The Office for Budget Responsibility estimates pension tax relief will cost the Exchequer £56 billion in 2025/26 (OBR, 2024) — a measure of how much value is on the table for business owners who plan ahead. This guide sets out how we help our clients with maximising pension contributions, making sure every pound you invest today supports the lifestyle you want tomorrow.

 

Why pensions still matter for company directors

Many directors see their business as their pension. While a profitable exit can fund retirement, relying on a single asset class carries risk. A diversified pension pot gives you:

• Tax-efficient withdrawals: Up to 25% of your fund can usually be taken tax-free, capped by the new lump sum allowance of £268,275.
• Creditor protection: Pension assets are generally outside your company’s balance sheet and remain protected if trading goes wrong.
• Inheritance planning: Unused funds often pass to beneficiaries free of inheritance tax.

According to the ONS, 84% of UK employees now pay into a workplace pension (ONS, 2024). Directors who ignore pensions therefore fall behind both staff and competitors. We encourage clients to set a clear retirement number and to fund it systematically through maximising pension contributions year after year.

 

Tax relief and maximising pension contributions

Pension tax relief operates on three fronts:

1. Corporation tax deduction: Employer payments reduce taxable profits at 25%. A £40,000 contribution can therefore shave £10,000 off this year’s bill.
2. Income tax relief: Personal contributions are made net of basic-rate tax, with higher- and additional-rate relief reclaimed through the Self Assessment return.
3. National insurance savings: Employer contributions avoid employee and employer NICs altogether, worth up to 28.05% combined.

Because employer payments score all three wins at once, we often advise owner-managers to fund pensions directly from the company. Our detailed cashflow models show the breakeven point compared with paying a dividend, drawing salary, or leaving profits in the business. 

 

Annual allowance, carry forward and tapered tips

The standard annual allowance is £60,000 for 2025/26. Many directors can put in more by using:

• Carry forward: Unused allowance from the previous three tax years – provided you were a scheme member – can be added to this year’s limit.
• Tapered allowance checks: If your adjusted income exceeds £260,000, the allowance gradually reduces to a £10,000 floor. Smart salary-dividend planning can help preserve the full £60,000.
• ‘Relevant UK earnings’ planning: Personal contributions cannot exceed your salary and certain benefits in kind. Increasing contractual pay before year-end unlocks extra relief, although employer payments are not restricted in this way.

We run allowance calculations during our quarterly reviews: to spot gaps early and schedule contributions before your financial year-end.

 

Employer contributions vs personal: choosing the right blend

There is no one-size solution, but our typical hierarchy is:

1. Employer contributions to use carry-forward headroom.
2. Personal contributions to claw back child benefit or reduce the personal allowance taper.
3. Additional employer contributions to hit a targeted retirement fund value.

For example, if your taxable income sits at £125,140, a gross personal payment of £25,280 restores the personal allowance and effectively yields 60% tax relief. We model scenarios and agree a contribution calendar so nothing is left to the last week of March. 

 

Investment freedom and long-term planning

Selecting the right wrapper matters as much as the amount you pay in. Directors often prefer a Small Self-Administered Scheme (SSAS) or Self-Invested Personal Pension (SIPP) because they allow:

• Commercial property purchase: Your company can pay rent to the pension, boosting returns.
• Private equity or unlisted investments: Subject to HMRC rules, you can back ventures you understand.
• Flexible drawdown: From age 55 (57 from 2028) you can vary withdrawals to manage tax brackets.

HMRC reported that 21,000 new SSAS arrangements were registered in the last five years (HMRC, 2024). Working with regulated advisers, we help you weigh expected investment returns against fees and governance duties.

 

Secure your retirement while cutting tax

Maximising pension contributions is one of the most effective ways UK directors and business owners can cut current tax, grow long-term wealth and protect their family. The 2025/26 rules offer generous headroom – £60,000 annual allowance, full carry forward and no lifetime cap – but the window resets every 6 April. Acting early lets you smooth cashflow, avoid tapered surprises and capture corporation-tax relief before the year closes.

Our team at EV Accountants combines pension modelling software with plain-English advice. We handle allowance calculations, prepare the paperwork for your scheme administrator and liaise with independent financial advisers where needed. Whether you want to fund a commercial property purchase inside a SSAS or simply invest monthly via a low-cost SIPP, we will structure the contributions, record the deductions and keep HMRC happy.

If you are serious about maximising pension contributions this year, book a strategy call. We will quantify the potential tax saving and set up a contribution timetable that fits your cashflow. Visit our contact page – your future self will thank you.