Bonus Or Salary?

Although paying a dividend rather than a salary will often be a more effective way of withdrawing profits, if the company is loss making and has no retained profits this will not be possible and it may be necessary to pay a salary or a bonus.

Although from a tax perspective, it makes no difference whether a salary or bonus is paid, if the shareholder is not a director, paying a bonus can be the more efficient option as less employee National Insurance will be due.

However, if the employee is a director, it will make no difference as directors have an annual earnings period for NIC and their NIC is recomputed on an annual basis at the end of the year.

 

This is a sample tip taken from our 136 page guide:
101 Ultimate Tax Strategies Revealed.

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