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At Lombard we believe one of the most underused tax reliefs available to Irish owner-directors is the employer pension contribution made before the company year end. It can cut your corporation tax bill, build a tax-efficient retirement fund, and do it without the usual earnings caps that apply to personal contributions. If your accounts are not yet finalised, this is worth a conversation now rather than after the figures are locked in.

Why employer contributions beat salary or dividends

Most directors extract profit through salary, dividends, or a mix of both. Both routes get taxed heavily before the money reaches you personally, between income tax, USC and PRSI on salary, or corporation tax followed by income tax on dividends.

An employer pension contribution works differently. The company pays into your pension directly as a business expense. Done correctly, it:

• Reduces the company’s profit, and therefore its corporation tax bill at 12.5% on trading income
• Avoids employer and employee PRSI entirely
• Is not subject to income tax, USC or benefit-in-kind in your hands
• Grows tax-free inside the pension fund until retirement

This is one of the few remaining ways to move company profit into your own name without an immediate tax charge.

The funding limits that matter

Unlike personal pension contributions, employer contributions are not restricted by the age-related percentage limits (15% of earnings under 30, rising to 40% at 60) or by the earnings cap. Instead, Revenue looks at whether the contribution is reasonable given your salary, service and expected retirement benefits.

In practice, this gives directors far more room to fund a pension quickly, particularly if:

• You have had limited pension provision in earlier years
• You are within ten to fifteen years of retirement
• Your company has had a strong trading year and has cash available

Your accountant and a pension adviser will typically run a funding calculation based on your age, salary and existing pension benefits to establish what the company can contribute while staying within what Revenue will accept as reasonable.

Timing: why the company year end matters

To get the deduction against this year’s profits, the contribution generally needs to be paid before the company’s year end, or Revenue needs to treat it as paid in the correct accounting period. This is different to the rules for a sole trader or an individual claiming relief on their own contribution, where the 31 October deadline (18 November 2026 if filing through ROS) applies instead.

For companies, the practical deadline is your own accounting year end, not the Form 11 date. If your year end is 31 December, that gives you a narrowing window to act. If your year end falls earlier in the year, you may already be past the point where a contribution can be deducted against this year’s figures, in which case it would apply to next year instead.

A short action list before your accounts are finalised

1. Confirm your company’s year end date. This is the real deadline, not the personal tax filing date.
2. Check current pension provision. Gather details of any existing pension plans, personal or occupational, so a funding calculation can be done properly.
3. Ask for a funding capacity calculation. This establishes the maximum contribution Revenue is likely to accept as reasonable, based on your age and salary.
4. Check company cash flow. The contribution needs to be paid in cash before the year end to get the deduction this year, so confirm the company can afford it without straining working capital.
5. Get the paperwork right. The contribution needs to be properly documented and paid to a pension provider before the cut-off, not simply accrued or promised.
6. Review the retirement lump sum position. The first €200,000 of a retirement lump sum is currently tax-free, with the next €300,000 taxed at 20%, so it is worth understanding how a larger fund will eventually be drawn down.

A word on balance

Pension contributions are attractive, but they are not the only lever available before year end. Some directors prefer to balance a pension contribution with a dividend or bonus, depending on their personal cash needs, mortgage position, or plans to sell the business in future years. There is no single right answer, it depends on your circumstances, your age, and how much flexibility you want over the money in the short term.

What matters most is not leaving the decision until after the year end has passed, because once the accounting period closes, the opportunity to reduce this year’s corporation tax bill through a pension contribution closes with it.

If you would like a funding calculation done before your year end, get in touch with Lombard on or richard@la.ie. You can also find more detail on our site at la.ie.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has
been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute
financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the
publisher nor the authors accept liability for any loss arising from reliance on this material.