Salary or Dividend?
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 profit 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 benefits. It is also within the personal allowance and below the threshold for employer and employee national insurance contributions (NICs).
For a more detailed explanation as to the most tax effective way to pay yourself, click here for the full article.