Salary vs Dividend for a Company Owner

It depends on the amount and on the salary you already draw. At lower amounts salary is usually cheaper, because the first brackets are low and credit points absorb part of the tax. At higher amounts, once salary has climbed into the top brackets and passed the National Insurance ceiling, a dividend becomes competitive. The calculator compares both at the same net.

A controlling shareholder — holding 10% or more — pays a higher dividend rate than an ordinary shareholder, with a further layer above the surtax threshold. Remember this comes after corporate tax was already paid on the profit, so the combined burden is significantly higher than the dividend rate alone.

It attributes deemed interest to a loan the company made to a controlling shareholder that doesn't bear adequate interest. In practice, an owner withdrawal left outstanding counts as a loan, and if not repaid by the statutory deadline it is reclassified as income — dividend or salary — retroactively.

Management fees are business income for the recipient, subject to income tax and National Insurance like any self-employed income, and deductible for the company. They make sense where a separate entity genuinely provides management services. The Tax Authority scrutinises this classification, and an amount not matching a real service can be disallowed.

Almost every right attached to employment: pension and severance contributions, National Insurance entitlement to unemployment and maternity benefits, and a study fund. Controlling shareholders also face limits on some of these. It's a consideration that never appears in the tax table but changes the picture.