Running a business:
Salary or dividend?

Shareholders of a company who are also directors may be in a position to choose whether to take salary or a dividend from a company. The tax treatments of dividends and salary are different. A dividend, bonus or a mixture of the two may give the lowest overall tax bill to you and your company depending on the profits of the company and the level of your earnings.

There are other factors apart form the tax charge that need to be considered when deciding whether to take a bonus or a dividend. For example, if you want to declare a dividend then the other shareholders will also be entitled to a dividend (unless they choose to waive this right).