How often can you pay dividends from your limited company?

Kirsty Young Tax

For a new small business owner, how to access the funds you need to live on yourself is a crucial question!

One of the primary ways you can take money from a limited company is via dividends. This basically a payment to you of the profit (or part of it), from your business, after tax and adjustments.

 

So, how often can I take a dividend?

The short answer :

As often you want really!

BUT

There are some things you’ve got to get right to do so.

The slightly longer answer:

There is a general myth about dividend payments. This dates back to when companies would often only declare ‘final’ dividends at a company’s Annual General Meeting. Indeed, some ‘Articles of Association’ (the document that governs certain legal procedures around the company) might have even required this to be the case.

However, times have changed. Most small limited company owners will instead take regular ‘Interim Dividends’.

 

Interim Dividends and the law

To make these dividends legal, you still need to take certain steps, including:

  • To ‘declare’ the dividends
  • To keep specific records

You can see the nitty gritty detail of this in our blog on Dividends – What You Need to Know, but in the meantime here’s a quick check list. You need:

  • Proof you had the profits to pay out (usually company accounts or a current Balance Sheet)
  • Meeting minutes declaring the dividend
  • An entry in your records / book-keeping software
  • Production of a Dividend voucher is recommended

At this point you would usually take the money, although you don’t have to. It could instead be marked in your ‘Director’s Loan Account’ for payment later, for example.

 

A few final words on dividend payments

Dividends can be a really useful tool for tax-efficiently extracting money for a limited company. However, they can also be technically challenging, and planning for the potential personal tax bill on them can cause a major headache.

To help put yourself in the best position with this, check out the following:

You can also ask your accountant. Or you can book a paid 1 hour, 1-2-1 consultation with us so you can ask simple questions, and then go on to divvy out the dividends with more confidence yourself. It’s a great way for you to get the help you need, when you need it.