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Since earnings are, by definition, remuneration or profit derived 'from employment', an income payment that, on principle, is not from the employment will not be within Class 1. The most obvious example is perhaps a dividend paid to a shareholder who works in the employing company that is derived from the ownership of shares in a profitable company. Once the director-shareholders have taken remuneration of £6,240 (2021/22 value) each to ensure they have a deemed contribution record without NIC cost, they are entitled to pay corporation tax on the profits and distribute the balance by way of dividend (see Division D6.6, the comparative total tax costs of dividend and remuneration, and the possible pitfalls of taking dividends instead of bonuses). This typical dividend route avoids both employer and employee NIC liability — provided none of the anti-avoidance rules applies, and provided the 'dividend' has not been manufactured out of bonuses using an artificial scheme of the kind attempted by PA Holdings Ltd¹.

There is also potential for some of the company's profits to be redirected to a non-working