How Do I Pay A Dividend?

Expenses

How do I pay a dividend?

Staying straight with the Companies Act

Sometimes your accountant will do this for you as part of providing company secretarial services but if you want to do it yourself, here’s how…

Why is the paperwork important?

If you’ve looked at the comparison between a Sole Trader and Limited Company, you’ve probably already realised that a lot of smaller businesses use the “small salary + big dividends” approach to minimise the amount of tax they pay.

HM Revenue and Customs are less enthusiastic about this and have challenged several people in the courts. Fortunately the courts have said that as long as dividends are paid in accordance with the Companies Act they are a legitimate way of rewarding shareholders. For us this means getting the paperwork right. To pay a dividend, you have to:

Examples

Here are some sample board minutes and dividend certificates for you to copy. Try ContractorCalculator for some other useful articles and examples.

You should, of course, speak to your accountant about this as well. This is an example of a bit of DIY that is probably not worth it. Pay a professional to do it.

Example of Board Minute and Resolution

FIREWORKS R US LIMITED

MINUTES OF A MEETING OF THE BOARD OF DIRECTORS HELD AT 1 MADE UP ROAD, ANYTOWN, COUNTY, W1 1ZB MONDAY 13TH NOVEMBER 2009.

Present:

Mrs C Wheel (Director) Mr S Wheel (Secretary)

  1. Mrs C Wheel was appointed Chairman of the meeting.
  2. The Directors recommended the payment of a dividend on 13th November 2009 at the rate of £11.00 per share on the Ordinary Shares in issue as at this date; in respect of the period ended 31st December 2008
  3. There being no further business, the meeting then closed.

(Signature of Secretary here) Secretary

Example - dividend certificate

FIREWORKS R US LIMITED

MINUTES OF A MEETING OF THE BOARD OF DIRECTORS HELD AT 1 MADE UP ROAD, ANYTOWN, COUNTY, W1 1ZB MONDAY 13TH NOVEMBER 2009.

16th November 2009

To: Mrs C Wheel, 1 Made Up Road, AnyTown, County, Postcode

Dear Madam

A dividend at the rate of £11.00 per share on the Ordinary Shares of the company has been duly declared for the accounts period ended 31st December 2008. The amount of such dividend due in respect of the shares registered in your name is as follows:

75 ordinary shares of £1 each at £11.00 per share £ 825.00
Tax credit equal to 1/9 of dividend £ 91.67
This dividend together with the associated tax credit is equal to a gross amount of £ 916.67

(Signature of Secretary here ) Secretary

Please note:

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