As another tax year passes and we offer our advice on various accountancy solutions here at Hive, we often get asked the question – how can I pay dividends to myself?
If you operate a limited company, you will be wearing two important hats, that of a shareholder and also of a director. It’s important to understand the distinct difference in these roles, especially when it comes to declaring dividends. As a shareholder, you are simply an investor expecting a nice return (dividend payment) each year. One of the responsibilities for a director is to declare the interim dividends to be paid throughout the year.
CAN I JUST TAKE MONEY WHEN I WANT?
A dividend is a payment a company makes to the shareholders if it has made a sufficient post-tax profit otherwise know has distributable profit; you mustn’t pay out more than the distributable profit held within the company.
To pay a dividend, you should:
- Calculate your profits to date (profits after deducting 19% corporation tax) and confirm there are sufficient funds and profits to pay a dividend;
- Hold a meeting to ‘declare’ the dividend to be paid;
- Keep minutes of the meeting (even if you are the only director);
- Write up a dividend voucher showing the date, company name, names of the shareholders being paid the dividend, and the amount of the dividend.
You must give a copy of the voucher to the shareholder(s) that have received a dividend and keep a copy of this and the meeting minutes in the company’s records.
You can ask other professionals to take on some of these tasks (for example, an accountant) but ultimately you’re still legally responsible. If you would like to know how Hive can help you more with your duties and responsibilities, please get in touch.