Director's pay planner
The third lever most director calculators ignore: employer pension contributions. Slide profit between dividends and your pension and watch the total tax change — salary, corporation tax, dividend tax and pension all in one picture.
Your company
Where the profit goes
Cash vs total value as the pension grows
The third lever
Most director pay tools argue about salary against dividends and stop. There is a third route out of the company, and for anyone not spending every pound they earn it beats both: employer pension contributions. Paid straight from company profit, they suffer no Corporation Tax, no income tax, no NI of either kind on the way in. Every other pound you extract fights through at least two of those. The slider on this page exists to make that visible.
£100,000 of profit, two ways
Draw everything from £100,000 of profit through the usual small salary plus dividends and you pocket £65,210. Redirect £20,000 into your pension first and cash in hand falls to £55,765. Read that carefully: £20,000 has gone into your pension and your spending money fell by £9,445. The other £10,555 is tax that never happened, upstream Corporation Tax plus the dividend tax you'd have paid drawing it. Pension money is locked until 55, rising to 57 in 2028, and the annual allowance caps contributions at £60,000, but as a price for more than doubling your money's survival rate, patience is cheap.
Getting the base right
Under the pension layer the usual rules still decide the mix: a salary around £12,570 uses your personal allowance, earns a State Pension year and is deductible for the company, with the Employment Allowance changing the employer NI arithmetic for companies with two or more on payroll. The salary vs dividend calculator isolates that decision, and the corporation tax calculator shows the company's own position, including the 26.5% marginal band where pension contributions work hardest of all.
Common questions
Why are employer pension contributions so tax-efficient for directors?
An employer contribution is paid from company profit before Corporation Tax and attracts no National Insurance or income tax when paid. Drawing the same profit as dividends means paying Corporation Tax first and dividend tax on the rest — so each £1,000 redirected into the pension typically costs only £470–£720 of take-home, depending on your bands.
How much can the company pay into my pension?
The annual allowance is £60,000 (2026/27), covering all contributions from you and the company, with unused allowance from the previous three tax years available to carry forward. It tapers for very high incomes (over £260,000 adjusted). Contributions must also be justifiable as a business expense — normal for a working director — and are worth agreeing with your accountant.
What is the catch compared with taking dividends?
Access and certainty. Pension money is locked until at least age 57 (from 2028) and is taxed when drawn — usually 25% tax-free and the rest at your marginal rate. Dividends are taxed more heavily now but are yours immediately. Most directors land on a blend: enough cash to live on, pension with as much of the rest as the allowance permits.
Does this replace the salary vs dividend calculator?
They work together. The salary vs dividend tool finds the best salary level for the cash you draw; this planner adds the third option — leaving less to extract at all by paying the company’s pre-tax profit into your pension — and shows the combined effect.
These results are estimates for general information only and are not financial advice. Pension and extraction decisions are long-term and personal — take regulated advice before acting. Read the full disclaimer.