The 123 Guides

Dividends

Business Structure Review

The 123 Way

What is included as standard for a fixed fee of £65.00 + vat per month:

Full Contracting health check - is your business performing as best it could - we'll ensure it is.

If you're new to freelance contracting, we'll ensure you start trading in the right way.

Then you can sit back and relax, your ongoing HMRC & Companies House compliance will be taken care of.

The 123 Way - simple & stress-free.

Once a company has worked out it’s profit and the amount of corporation tax that is due, what ever is left can be paid out as a dividend. Dividends are paid to shareholders of Limited Companies.

Before you can declare a dividend the company must ensure that there are sufficient post tax profits available. If you make a dividend payment and there is not enough post tax profit in the company (even if there is enough cash in the bank) then the dividend is illegal. In the summary pages of our Bookkeeping Spreadsheet it will tell you how much profit is available to pay out as a dividend, this takes into account all expenses and corporation tax.

Note: You must keep your spreadsheet up-to-date with all income and expenses for this calculation to be correct.

How to declare a dividend

Once you are satisfied there is sufficient post tax profit, you need to declare the dividend by filling in a Company Board Minute and creating a Dividend Tax Certificate - examples are included with our welcome to The 123 Way pack.

The Board Minute must be printed, signed and filed with your Company’s Statutory Books (your company's paperwork). The Dividend Certificate should be printed, signed and filed with your personal tax documents for your Personal Tax Return.

There are no limits to how many dividends that a company can declare; however in reality one a month is usually sufficient. You must complete a Company Board Minute and Tax Certificate for every dividend payment.

Taxation of Dividends

If the shareholder receiving the dividend is a basic rate tax payer then they will have no tax to pay on the dividend.

If the shareholder is a higher rate tax payer, there will be tax due on the dividend payment. This liability will be due when you file your personal tax return.

Remember to enter the amount of dividend you pay on your Bookkeeping Spreadsheet in the expenses section of the month you make the payment.

Running a Limited Company

Director's Responsibilities

Company Bank Account

Payroll

Salary

Dividends

Limited Company Accounts

Corporation Tax

VAT - The Basics

VAT - The Choices

123 Income Illustrator

The 123 Income Illustrator shows you what you can expect to take home from a given contract.

It also compares the differences between freelance contracting through your own Limited Company, through an Umbrella Company, as a Sole Trader or if you were to return to full time employment.

The123 Income Illustrator

Invoicing

Expenses

Expenses - Detailed Guide P1

Expenses - Detailed Guide P2

IR35

IR35 - Detailed Guide P1

IR35 - Detailed Guide P2

Company Secretarial

123 Referral

We run a simple referral programme where for every client you refer to The 123 Way we will give you £123.00

For more information check out the link below:

123 Referral

Personal Tax

Importance of Information

Important Dates

Being a Sole Trader

Calculators

FAQs

The 123 Blog

To keep up-to-date with tax legislation and 123 news check out the 123 Blog.

The 123 Blog

Disclaimer:
This information is for general information only. No responsibility is taken for any action taken or refrained from in consequence of its contents. Always seek professional advice before acting.

About us

Running a Limited Company

Contractor Expenses

Freelance

Freelance Case Study

Limited Company Accounts

Being a Sole Trader

Tax Return

Business Structure Review

Business Banking

Umbrella vs Limited Company

VAT Registration