Salary or dividend? March 2016

Owner-managers and contractors often pay themselves in a combination of salaries, bonuses and dividends.

A common strategy is to draw a salary of around £8,000 while also extracting proits from the business as a dividend. A salary of £8,060 (for the 2015/16 tax year) preserves entitlement to the state pension and some beneits. It is also within the personal allowance and below the threshold for employer and employee national insurance contributions (NICs).

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