If the company is an owner operated limited company (i.e. the shareholders and directors are the same people) then it is normally more tax efficient for the director(s) to take a small salary up to the national insurance threshold and the remainder of their withdrawals as dividends.

By structuring the withdrawals in this way the company directors or shareholders do not pay income tax or NI (although contributions are still made).

The only tax payable is corporation tax on the profits of the company. If the company directors and shareholders are not the same people or the shareholdings are unequal then wages should be paid as per the hours worked in the company so that the distribution of funds is fair.

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