Directors can take money out of their business in a few ways; salaries, directors’ loans or dividends

What are dividends?

  • As a shareholder you are entitled to a portion of your company’s net profit.
  • Net profit is the profit that is left after all of the expenses have been taken from the revenue.
  • Net profit can be kept as retained earnings for the business’ future activities or given out as dividends to shareholders

When can I take dividends?

  • When you have made a profit and you can cover all your liabilities! You must have a meeting with all directors and take minutes (even if you are the only director).
  • Then, you must ‘declare’ a dividend and a dividend voucher that corresponds with every dividend payment that the company makes.
  • You could take dividends as money out of the business or to lower and over-drawn directors loan account
  • When the available ‘reserves’ have been thoroughly assessed to determine how big the dividend can be

How are dividends taxed? (Tax year 23-24)

  • First £1,000 of dividend income is tax free
  • The following are the dividend tax bands: basic rate tax payer 8.75%, high rate tax payer 33.75%, additional rate tax payer 39.35%

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