Low salary-high dividend payments soar

The ‘dividend-salary’ mix traditionally favoured by incorporated consultants has expanded well beyond the niche contracting space, a dataset indicates.

In fact, serving to underline the growth in self-employment in the general economy, the ONS found that the total paid in dividends by workers beat its expectations five-fold.

So rather than the £12.2billion originally anticipated in worker dividend payments, the total amount paid in such distributions by the self-employed in 2016 was £61.7bn, the Financial Times reported.

Commentators say the rise in self-employment since the 2008 financial crisis has put many more people in the position of being able to pay themselves a low salary and high dividends.

End-users have also pushed more people towards operating as PSCs (to ease overheads), as have recruitment agencies which generally refuse to engage workers who are sole traders.

Another factor pushing up dividend payments relates to April next year, when the amount that can be distributed tax-free is due to fall to just £2,000, compared with £5,000 currently.

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