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Glossary

• Accounting Records
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• Class 2 & 4 NI
• Companies House
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• Costs
• Depreciation
• Dividends
• Drawings
• Fixed Assets
• Form CT 41 G
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• VAT - Schemes
• Year End

Dividends

Profits of a limited company are distributed through dividends.

A dividend is the distribution of 'after tax profits' so it is essential that the company has made a profit and has made sufficient provision to cover its corporation tax bill.

If this rule is not followed then the dividend could be viewed as an unlawful distribution of the company's funds.

When the dividend is paid by the company to its shareholders it is given an associated tax credit of 10% - see below to see how this is calculated.

This tax credit is a notional amount only. Nothing is due to HMRC and no further tax needs to be paid on this dividend unless you are a higher rate tax payer - see below.

It is essential that whenever your company pays a dividend to you as a shareholder, it must be formally declared at a director's meeting.

HMRC can ask for proof of the declaration of dividends and it is recommended that these documents are keep up to date.

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