Pension Planning Before Exit

Why timing matters more than how much you contribute

If you’re planning to sell your business, when you make pension contributions is often more important than how much you contribute.

Leaving it too late—or missing key tax rules—can mean you lose the opportunity altogether. In some cases, this can’t be reversed. Acting at the right time can make a significant difference to the tax benefits you receive.

Why this year is particularly important

Several recent changes mean pension planning around a business sale is more time-sensitive than usual:

• You can normally contribute up to £60,000 a year into a pension, and you may also be able to use unused allowances from the past three years. This could allow contributions of up to £240,000 in one tax year, depending on your situation.
• However, from April 2027, unused pension funds will generally be included in your estate for inheritance tax. This means pensions may be slightly less effective for passing on wealth than they were before.
• Business sales can be delayed unexpectedly. Even a one-day delay across the tax year (for example, from 5 April to 6 April) could reduce how much you’re allowed to contribute.

Should you contribute before or after selling?

One of the most important decisions is whether to make pension contributions before or after your business sale completes.

• Before the sale:
  Contributions made by your company may reduce your corporation tax bill and can be a very tax-efficient way to build your pension.
• After the sale:
  Once the business is sold, you usually lose the option to contribute through the company. You may also face tighter limits on personal contributions, especially if your income is high in the year of sale.

For many business owners, contributing before the sale completes is the more efficient option—but timing is critical.

Common misunderstandings

• “I’ll just contribute after I sell.”
  After a sale, you can usually only contribute based on your earnings. If your income is low (for example, if your sale proceeds are treated as a capital gain), your ability to contribute may be limited.
• “The limits won’t affect me.”
  Contribution limits can reduce significantly if your income goes above certain thresholds. In some cases, making a large pension contribution can even lead to an unexpected tax charge.
• “I can always use allowances from previous years.”
  You can only use previous years’ allowances once you’ve used the current year’s allowance—and those earlier allowances may already be reduced if your income was high.

A key risk to check early

If you’ve already taken money flexibly from a pension, your annual contribution limit may drop to £10,000. This lower limit cannot be increased, and unused allowances from previous years can’t be used.

Because of this, it’s important to confirm your position before making any plans.

Balancing pension contributions with access to cash

Putting money into a pension before a sale reduces the cash held within your business. This can affect the value of the deal or how buyers assess your company.

You should also keep in mind:

• Pension funds are not easily accessible until later life.
• Moving too much into a pension could leave you with less flexible cash after the sale.

A balanced approach is important—consider both long-term retirement needs and short-term access to funds.

When it’s too late

In some situations, pension contributions are no longer possible—for example:

• The business sale has completed
• You’ve already triggered a lower contribution limit
• The tax year has ended
• The company has been closed

These situations are usually final, which is why early planning is essential.

What options may still be available

If your sale hasn’t completed yet, you may still be able to:

• Make pension contributions through your business before the sale
• Make personal contributions if you have sufficient income
• Consider contributions for a spouse, which have separate limits

Act early to make the most of your pension

Pension planning can be one of the most valuable financial steps to take before selling your business—but only if it’s done at the right time.

In simple terms:

• Timing is critical — opportunities can disappear quickly once a sale progresses
• Pre-sale contributions are often more tax-efficient than those made afterwards
• Rules and limits can reduce what you’re allowed to contribute, especially for higher earners
• Delays or past pension withdrawals can restrict your options
• It’s important to balance tax savings with access to cash after the sale

Getting clear advice early in the sale process can help ensure you don’t miss valuable opportunities.