Dividends or Salary?
Are you struggling to choose between taking dividends and salary for your business? It’s a common dilemma and one that you should think about carefully.
Dividends come with tax advantages and offer lower taxation rates compared to salaries. Not to mention, they dodge National Insurance Contributions (NICs), effectively trimming the overall amount you pay in tax. However, you need to remember that dividend payouts are based on company profits. This means that they can vary from year to year.
On the flip side, opting for salaries provides you with a predictable income stream regardless of how the company performs. And salary payments are deductible as a business expense which will lessen your corporation tax bill. Plus, receiving a salary unlocks certain perks, for example, state pension contributions as well as being eligible for financial products based on your income.
At the end of the day, the choice between dividends and salary comes down to your individual circumstances. Your personal financial needs, tax goals, and long-term business plans should all be factored into your decision.
We can hep you decide what’s right for your own circumstances. Why not call Callan Accountancy’s tax experts? They can provide all the information you need to make the choice that’s right for you and your business.
