Director information hub: Dividends
Dividends are payments made to shareholders from company profits after Corporation Tax.
Help us to improve the director information hub by completing a short feedback survey.
Dividend basics
In many small companies, the main shareholder or shareholders are normally also the directors.
Dividends have 2 main uses:
- to reward investors in companies
- a way for directors (if they are also shareholders) to take income from their company
Before any dividends can be paid out, they must be declared and recorded formally.
They can be paid out at any time of the year.
You can only take dividends from retained company profits.
Dividends and tax
Every shareholder that receives a dividend from a company may need to declare the amount to HMRC.
If your company cannot afford to pay out dividends, but they are still taken, they are treated as a loan and must be paid back.
Dividends for directors
If you are a director and a shareholder of a company, dividends can be taken as part of your annual remuneration.
Before you consider taking or paying out dividends, it is important to get professional financial advice