Once your business is a company, your money and the company's money are legally separate — so you can't just "take" cash. You pay yourself, and how you do it changes your tax bill. The two main routes are a salary and a dividend.
Option 1: Pay yourself a salary
A salary (or director's remuneration) is a deductible expense for the company — so the company pays no income tax on that portion of profit. You then pay PAYE on the salary at the normal individual rates.
- Upside: salary reduces company tax; you build a contribution record; it's predictable.
- Downside: at higher amounts you hit the 39–45% personal brackets.
Option 2: Pay yourself a dividend
Dividends are paid out of after-tax profit. So the company first pays 27% income tax on its profit, and then a 20% dividends tax is withheld when the dividend is paid to you.
- Upside: simple; no PAYE, UIF or SDL.
- Downside: it's effectively taxed twice — 27% then 20% — which works out to roughly 41.6% in total.
Which leaves you with more?
It depends on the amount. At lower income, a salary usually wins because your primary rebate and the low brackets keep PAYE small. At higher income, the fixed ~41.6% on dividends can beat the top 45% personal bracket. Many owners use a mix — a modest salary up to a sensible bracket, then dividends on top.
Work out your own split with our salary vs dividend calculator, and see the bigger structure question in sole proprietor vs (Pty) Ltd.
A few practicalities
- Keep it separate: pay yourself into your personal account from the company account — never mix the two.
- Declare dividends properly: a dividend needs a resolution and the 20% dividends tax paid to SARS.
- Watch your cash flow: don't pay out money the company needs for VAT, PAYE or supplier bills.
Make the decision with real numbers
The right mix depends on your actual profit, which changes month to month. 360books tracks your company's profit and tax in real time, so you can decide how to pay yourself based on facts — not a guess at year-end.