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0113 246 1234

Dividends – When can you take them from your business?

Limited company owners can take money out of their business using dividends. In fact, it is a people and effective method of managing income tax liabilities.

By drawing dividends, alongside a regular wage, owners can benefit from an additional £2,000 annual allowance and advantageous rates of dividend tax, which can lower their tax rate by reducing their overall amount of regular taxable income.

Despite the benefits this approach offers, owners cannot just pull money out of their business when they want to, as there are restrictions on the circumstances in which a limited company can pay a dividend.

Before any payment can be made, the company must have sufficient profits from the current and previous financial years to cover the dividend that is issued.

The company will also need to pay a dividend to all eligible shareholders, so you will need to factor this into any calculations.

Dividends must be declared by the directors and minutes of the meeting must be kept, even if there is only one director.

A dividend voucher will need to be prepared, including the date, the company name, the names of the shareholders receiving the dividend and the amount.

Copies must be given to the shareholders receiving the dividend and retained on the company’s records.

Link: Running a limited company: Your responsibilities

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