What is a Dividend?

 

 

A dividend is a payment a company can make to shareholders if it has made enough profit.

You can’t count dividends as business costs when you work out your Corporation Tax.

Your company mustn’t pay out more in dividends than its available profits from current and previous financial years.

You must usually pay dividends to all shareholders.

To pay a dividend, you must:

  • hold a directors’ meeting to ‘declare’ the dividend

  • keep minutes of the meeting, even if you’re the only director

 


Dividend paperwork

For each dividend payment the company makes, you must write up a dividend voucher showing the:

  •  date

  • company name

  • names of the shareholders being paid a dividend

  • amount of the dividend

  • the amount of the ‘dividend tax credit’

 


Dividend tax credits

The tax credit means your company and shareholders don’t need to pay tax when the dividend is paid. But shareholders may have to pay tax on it.   

Working out the dividend tax credit

To work out the dividend tax credit, divide the dividend amount by 9.

 


Example

You want to pay a dividend of £900. Divide £900 by 9, which gives you a dividend tax credit of £100. Pay £900 to the shareholder – but add the £100 tax credit and record a total of £1,000 on the dividend voucher.

You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.