It's not better! That's the point - there is no 'better' it depends on the individuals concerned. You are right though that it is very easy to tell ltd co clients to take the salary / dividend route - the reason that it is easy is because it is the right advice. What can the taxman do about it? Dividends are paid from taxed profit and are also taxed on the individual once the basic rate threshold has been exceeded. This is a legal and sensible way to extract profit.