Company Pension Contribution Tax Savings Calculator

A limited company can pay directly into a director’s pension. Where the contribution qualifies as a business expense, it reduces the company’s taxable profit and therefore its Corporation Tax bill.

Use the calculator below to estimate the Corporation Tax saving and the effective cost to your company. It also gives you a basic check against the pension annual allowance.

How company pension contributions save tax

An employer pension contribution normally reduces the company’s taxable profit where it meets the usual rules for a deductible business expense.

For example, if your company makes a £10,000 pension contribution and that contribution saves Corporation Tax at 25%, the immediate figures are:

• Company pension contribution: £10,000
• Corporation Tax saving: £2,500
• Effective cost to the company: £7,500

The calculator does this calculation for you using the Corporation Tax rate you select.

HMRC says employer contributions to a registered pension scheme can qualify as a deduction when calculating taxable business profits, provided they meet the wholly and exclusively test. For a director of a close company, HMRC looks at the overall remuneration package and whether there is a genuine business purpose for the payment.

See our full guide to paying into a pension from your limited company for more on how company contributions work.

Why the Corporation Tax saving isn’t always simply 25%

Limited companies don’t all save Corporation Tax at the same marginal rate.

A company within the small profits regime may save tax at 19%. A company paying the main Corporation Tax rate may save 25%. For profits within the marginal relief band, an additional deductible expense can produce a marginal Corporation Tax saving of 26.5% in the usual case.

This is why the calculator lets you choose the rate rather than assuming that every company saves 25%.

If your company is within the marginal relief band, associated companies and other factors can affect the thresholds. Our Corporation Tax marginal relief calculator can help you work out your position.

What is the pension annual allowance for 2026/27?

The standard pension annual allowance is £60,000 for 2026/27. Employer contributions count towards it, along with other pension input for the tax year.

You may also be able to use unused annual allowance from the previous three tax years under the carry forward rules. The calculator doesn’t work out carry forward, so don’t treat £60,000 as a maximum amount that your company can contribute.

The annual allowance can also fall below £60,000 for people with high incomes. For 2026/27, the tapered annual allowance rules can apply where adjusted income exceeds £260,000, subject to the separate threshold income test.

What if the MPAA applies?

The Money Purchase Annual Allowance (MPAA) can apply once you have flexibly accessed benefits from a defined contribution pension.

The MPAA is £10,000 for 2026/27. It restricts the amount of money purchase pension saving you can make without potentially facing an annual allowance tax charge.

Tick the MPAA box in the calculator if you know that it applies to you. The MPAA rules become more complicated if you also have defined benefit pension savings, so take advice before making a large contribution if you’re unsure of your position.

Company contribution or personal contribution?

They’re not the same thing.

A personal pension contribution comes from you personally and has its own tax-relief rules. An employer contribution comes directly from your limited company and can reduce company profits for Corporation Tax purposes if it qualifies for relief.

Employer contributions also aren’t restricted by your salary in the same way as tax relief on your own personal contributions. They still count towards your pension annual allowance, however.

We’ve covered the differences in more detail in company vs personal pension contributions for directors.

Pension contribution or dividend?

Directors often face a straightforward choice when their company has spare cash: take more money out now or leave it invested for retirement.

A dividend comes from profits after Corporation Tax and may then create a personal dividend tax liability. A qualifying employer pension contribution can reduce taxable company profits instead, while putting the money into your pension rather than your bank account.

That doesn’t automatically make the pension the better choice. The money stays inside the pension until you can access it, and tax rules apply when you eventually take pension benefits.

See our guide to pension contributions vs dividends for a closer comparison.

What the calculator doesn’t cover

This calculator gives you an estimate of the immediate Corporation Tax effect of a company pension contribution. It doesn’t attempt to calculate your complete pension tax position.

In particular, it doesn’t calculate:

• the tapered annual allowance;
• unused annual allowance carried forward from earlier tax years;
• an annual allowance tax charge;
• the detailed MPAA rules where you have different types of pension;
• tax on pension benefits when you eventually withdraw them; or
• whether a particular company contribution meets the wholly and exclusively test.

Large pension contributions can involve both company tax and personal pension tax rules. Check the figures with your accountant or pension adviser before your company makes a substantial payment.

Tax rules and pension allowances checked for the 2026/27 tax year. This calculator provides a general illustration and isn’t personal tax, investment or pension advice.