I am writing this blog because I wanted to give you an idea of how directors and shareholders get paid from a company that they own.

One of the problems small businesses can have, as we have seen over the years is that they do not always appreciate how important drawing money out of the business in an appropriate manner is.

Also as a director or owner of a small company then it’s a bit more complicated to get paid than if you were working for someone else.

And the reason for this is that directors usually take a combination of a small salary from their company as well as dividends.

The idea behind this is that the small salary uses up their personal allowance for tax which means they can take that salary tax free and then the dividends that they get are at a better rate of tax than a salary free because after you have taken up your personal allowance in a salary you end up paying National Insurance on that.

With a Dividend you do not have to do that, so a dividend can often be a far more tax efficient way of getting paid than with a salary.

It is unlikely that a director will have the exact same set of circumstances as another director.   Combinations of the amounts drawn from the business as salary and dividends will vary according to whatever else they have going on in their life and perhaps even a family situation

So if you are interested in finding out what the best level of salary to dividends is then please get in touch by calling 01604 330129 or email us at nishi.patel@northantsaccounting.co.uk.    We would be able to work out a solution based on your unique circumstances.