How to take dividends from a limited company

Whether you are the sole shareholder, or have multiple shareholders, when issuing dividends, you need to record this through your company. There are certain steps you need to follow when doing this:

1. You will need to hold a ‘board meeting’ to agree on a dividend declaration and a record of the meetings minutes.
2. A dividend voucher needs to be recorded and a copy kept on records for the business and to the shareholder/s. This can be sent by email, paper, or generated by any number of accounting software packages. There is no standard template for this information, however the details that need to be included are:
   • the date
   • company name
   • name and address of the relevant shareholder
   • the total number of shares owned
   • the total dividend payable
   • the director’s signature.

One thing to note, is that you do not HAVE to pay yourself dividends. You can just simply leave the profit in the company’s bank account if you choose to. Your accountant can always guide you on what is best for you and your business.

As a company owner you can choose to pay yourself through PAYE (salary) or dividends, but it is often the combination of the two that will be the most beneficial to you. Taking a low salary and a higher dividend is usually the most tax effective combination for the following reasons:

• You don’t pay National Insurance on dividends.
• Depending on how many dividends you pay yourself, you can minimise your personal tax liability.
• Taking a salary triggers a national insurance record for your state pension
• Your company can claim the cost of your salary when it calculates its corporation tax making a saving for the business
• You can pay yourself in dividends up to the level of post-tax profit in your company