Do Employer Pension Contributions Count Towards the Annual Allowance?
Yes. The £60,000 annual allowance is a cap on everything that goes into your pensions in the tax year, whoever pays it. But employer money is treated differently in three useful ways: it isn't capped by your salary, it isn't taxed as your income, and it carries no National Insurance.
Employer contributions count in full towards your £60,000 annual allowance, which covers "the total amount paid in to a defined contribution scheme in a tax year by you or anyone else (for example, your employer)" 1. Salary sacrifice contributions are employer contributions, so they count too. Unlike your own contributions, employer contributions are not limited to your earnings, are not taxable on you 2 and attract no National Insurance 3. Go over the allowance (plus any carry forward) and you pay an annual allowance charge on the excess.
- Annual allowance 2026/27: £60,000; tapered to as little as £10,000 for the highest earners. 4
- It counts your contributions (gross, including tax relief added), your employer's and anyone else's. 1
- Employer contributions to a registered scheme are not taxable on the employee. 2
- They are left out of earnings for Class 1 National Insurance. 3
- The employer deducts them from its profits in the period they are paid, if made wholly and exclusively for its trade. 5
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Two limits, and only one applies to employer money
People often mix up two separate limits:
| Limit | What it caps | Employer contributions? |
|---|---|---|
| Relief limit: 100% of relevant UK earnings (or £3,600) | Your own contributions that get tax relief | Not included |
| Annual allowance: £60,000 | Everything paid in for you before a tax charge | Included in full |
The relief limit in the Finance Act 2004 applies to contributions made by or on behalf of the member 6. Your employer's contributions are not yours, so they are not limited by your pay. They are limited only by the annual allowance (and, for the employer, by the rule that the payment must be for the purposes of the business to be deductible 5).
Worked example: an employee
Emma earns £70,000. She pays 5% of salary into a relief-at-source workplace pension and her employer pays 10%.
| Emma's contribution (5%, gross including 20% relief) | £3,500 |
| Employer contribution (10%) | £7,000 |
| Pension input for the year | £10,500 |
| Annual allowance | £60,000 |
| Room left before carry forward | £49,500 |
Emma could pay up to £49,500 gross more herself this year: it fits inside both her £70,000 earnings and the allowance. If her employer offered a bonus sacrifice instead, the sacrificed bonus would also count as an employer contribution.
Worked example: a company director
Raj runs his own company. He takes a £12,570 salary and the rest as dividends. Dividends are not relevant earnings, so his personal contributions only get relief up to £12,570 gross. Instead his company pays £40,000 straight into his SIPP as an employer contribution.
| Employer contribution | £40,000 |
| Income Tax or NI on Raj | £0 |
| Corporation Tax saved at the 25% main rate | £10,000 |
| Corporation Tax saved at the 19% small profits rate | £7,600 |
| Annual allowance used | £40,000 of £60,000 |
The Corporation Tax saving depends on the company's profits: 19% up to £50,000, 25% above £250,000, with marginal relief in between 7. The deduction is given in the accounting period the contribution is actually paid 5, and it counts towards Raj's annual allowance in the tax year it reaches the scheme. Unused allowance from the last three tax years can let a company pay in more than £60,000 in one year.
When employer contributions push you over
Defined benefit members and high earners are the people usually caught. Take a £150,000 earner whose employer pays £75,000 into a defined contribution pension (not by salary sacrifice) with no unused allowance to carry forward. Adjusted income is £225,000, under £260,000, so there is no taper. The excess is £75,000 − £60,000 = £15,000, taxed at 45% as the top slice of income: a charge of £6,750. Check carry forward first; many charges disappear once unused allowance from the previous three years is counted 8.
For the tapered annual allowance, employer contributions are added in when working out adjusted income, so a large employer contribution can itself trigger the taper. The tapered annual allowance guide shows both income tests.
How to check your figure
- Add up your own gross contributions for the tax year (payslips or provider statements).
- Add your employer's contributions, including anything paid through salary or bonus sacrifice.
- For a defined benefit scheme, ask the scheme for its pension input amount instead.
- Compare the total with £60,000 (or your tapered or money purchase allowance), then add any unused allowance from 2023/24, 2024/25 and 2025/26. The annual allowance checker does this for you.
Frequently asked questions
Do employer pension contributions count towards the £60,000 annual allowance?
Yes. The annual allowance covers the total paid into your defined contribution pensions in the tax year by you or anyone else, including your employer. Salary sacrifice contributions are employer contributions, so they count too.
Are employer contributions limited to my salary?
No. The 100% of earnings limit applies only to your own contributions. Employer contributions are limited by the annual allowance, which is why company directors on a small salary often use employer contributions.
Do I pay tax or National Insurance on employer pension contributions?
No. Employer contributions to a registered pension scheme are not taxable on the employee, and they are left out of earnings for Class 1 National Insurance.
What happens if my employer pays in more than my annual allowance?
First add any unused allowance from the previous three tax years. Anything still above the limit is taxed on you as the top slice of your income through the annual allowance charge, which you report on your Self Assessment return. In some cases the scheme can pay it for you through Scheme Pays.
Can my limited company pay into my pension?
Yes. A company contribution to a director's pension is an employer contribution. It is deductible for Corporation Tax in the accounting period it is paid if made wholly and exclusively for the trade, and it counts towards the director's annual allowance.
Do employer contributions affect the tapered annual allowance?
Yes. They are included in adjusted income, one of the two tests for the taper. The taper only applies if threshold income is over £200,000 and adjusted income is over £260,000.
Related: annual allowance 2026/27 · carry forward rules · minimum workplace contributions · directors and the self-employed
Sources & references
- Pension annual allowance — GOV.UK
- ITEPA 2003, section 308: employer contributions to a registered scheme — legislation.gov.uk
- NIM02716: employer pension contributions and Class 1 NICs — HMRC National Insurance Manual
- Pension schemes rates and allowances — HMRC (GOV.UK)
- PTM043100: employer contributions, tax relief — HMRC Pensions Tax Manual
- PTM044100: tax relief for members, conditions — HMRC Pensions Tax Manual
- Corporation Tax rates and reliefs — GOV.UK
- Check for unused annual allowance (carry forward) — GOV.UK
Every headline figure above is checked against the official GOV.UK / HMRC guidance listed here for the 2026/27 tax year. Links open on GOV.UK.
Disclaimer: General information for the 2026/27 tax year, not financial or tax advice. Whether a company's contribution is deductible depends on its circumstances; ask the company's accountant before a large payment.