If you are an owner of a limited company, taking dividends from your business is a mainstay of effective tax planning. When taking money in the form of a salary, you can make the most of an additional £2,000 annual allowance and lower rates.
However, there are restrictions on the circumstances in which a limited company can pay dividends. Crucially, the company must have sufficient profits from the current and previous financial years to cover the dividend payment.
The company will also need to pay a dividend to all eligible shareholders, so you must factor this into any calculations.
Dividends must be declared by the directors and minutes of the meeting must be kept, even if there is only one director.
A dividend voucher will need to be prepared, including the date, the company name, the names of the shareholders receiving the dividend and the amount.
Copies must be given to the shareholders receiving the dividend and retained on the company’s records.
If you have questions about taking dividends from your business and maintaining your obligations as director, contact us.
