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Salary or dividend?

What’s the most tax-efficient way to pay yourself in 2016/17?

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 profits 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).

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