Salary Versus Dividend A sole owner/director is not legally bound to receive any remuneration at all. A director will normally take salary to reflect paid work done A shareholder will take dividends - to reflect the return on investment in the company. # Therefore a Ltd co owner, being an owner will take dividends and also as a worker will take a salary. HMRC can have issues where dividends are "excessively high" compared to salary, they view this as potential tax evasion. If you are entering this scenario, take specialist advice from us first to ensure best practice.   Best Practice The tax-free allowance is taken via payroll. This keep Ni contributions up to date. Extra amounts are taken (initially as a directors loan) and will then be offset to a "dividend declaration". Although payslips are produced during the year, some directors opt to not pay this exact amount every month but rather draw monies when required. This is fine, at year end we add up all the directors’ drawings, deduct the net pay due (from the payslips), the rest is then declared as dividend.