Salary vs Dividends: How to pay yourself as a company director

In this article, Kim Sones of Accredited Supplier, Sones Accountancy discusses the different ways company directors can pay themselves.

As a business owner, you have invested a lot of time and hard work to ensure your business is successful.  Now you’ve reached the point where it’s time for you to take money out of the business and pay yourself.  That’s a great situation to be in but what are the things to take into consideration as a director?

Company directors are in control of their finances, and it is their decision how much they earn and what rewards they enjoy.  However, deciding how much to pay themselves and how they will do this is crucial to managing their finances. 

Many business owners assume that the best way to pay themselves is by simply taking a salary.  However, there are different ways a director can do this and whether to pay a salary or a dividend or a combination of both will depend on their level of income, the tax bracket they fall in and their circumstances.  Getting the right balance between a modest personal income and maintaining great financial health for a business can be a challenge.

So, what is the difference between the two payment methods and why would someone use both?  It doesn’t have to be complicated but with a bit of insight, it might be possible for directors and their company to make savings on their tax bill every year.

Recently, we wrote an article for Pro Landscaper magazine providing advice on the most tax-efficient way for directors to pay themselves which may interest you.  To read the article, please click on the link below and go to pages 21 and 22:

Salary vs Dividends. How to pay yourself as a company director.

We would strongly advise you to speak to a professional about your specific circumstances before taking any action.  If you would like any help, please get in touch.