Limited Company - Dividends

Once a company has worked out it’s profit and the amount of corporation tax that is due, what ever is left can be paid out as a dividend.

Once a company has worked out it’s profit and the amount of corporation tax that is due, what ever is left can be paid out as a dividend. Dividends are paid to shareholders of limited companies.

Before you can declare a dividend the company must ensure that there are sufficient post tax profits available. If you make a dividend payment and there is not enough post tax profit in the company (even if there is enough cash in the bank) then the dividend is illegal.

In the Key Info pages of our CMJ Accountancy system it will tell you how much profit is available to pay out as a dividend, this takes into account all expenses and corporation tax.

Sounds complicated but we make it simple – you check your pages on our website and it tells you what is available to take.

How to declare a dividend

Once you are satisfied there is sufficient post tax profit, you need to declare the dividend by filling in a Company Board Minute and creating a Dividend Tax Certificate.

The Board Minute must be filed with your Company’s Statutory Books (your company’s paperwork). The Dividend Certificate should filed with your personal tax documents for your Personal Tax Return.

As we do all of this for you, you don’t have to do a thing.

There are no limits to how many dividends that a company can declare; however in reality one a month is usually sufficient.

Taxation of dividends

If the shareholder receiving the dividend is a basic rate tax payer then they will have no tax to pay on the dividend.

If the shareholder is a higher rate tax payer, there will be tax due on the dividend payment. This liability will be due when we file your personal tax return.

On the Key Info page of our CMJ Accountancy service you will see exactly how much you can take in dividends before you have to start paying income tax on them – it really helps you budget.

For further help, or to enquire about joining our services, please call us on 0845 834 0264 or drop us an email at info@cmjaccountancy.co.uk.

Disclaimer

This information is for general information only. We take no responsibility for any action taken or refrained from in consequence of its contents. Always seek our professional advice specific to your circumstances before acting.