{"id":4486,"date":"2015-08-20T10:12:16","date_gmt":"2015-08-20T09:12:16","guid":{"rendered":"https:\/\/www.qualityformations.co.uk\/blog\/?p=4486"},"modified":"2024-04-12T08:21:54","modified_gmt":"2024-04-12T07:21:54","slug":"issue-dividends","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/issue-dividends\/","title":{"rendered":"How to issue dividends in a company limited by shares"},"content":{"rendered":"
\n Last updated: 12 Apr 2024<\/strong>\n <\/div>\n \n

The owners of a company limited by shares must follow certain procedures when removing profit from the business. This is because, unlike sole trader businesses, limited companies exist as separate legal entities. All income belongs to the company until it is distributed to directors and shareholders as remuneration via permitted payment procedures.<\/p>\n

You can extract all business profits as a director\u2019s salary, but it is more tax-efficient to pay yourself a small \u2018nominal\u2019 salary and receive the rest of your income as dividends. The best way to do this is to take a salary up to your annual Personal Allowance, which is tax-free. This will also preserve your right to the State Pension and other benefits.<\/p>\n Our Fully Inclusive Package - the perfect way to form a company<\/span><\/a>\n \n

A company can\u00a0issue dividends to its members (each member receiving payments in proportion to the shares held) at any time, provided the company has enough retained post-tax profit after all bills, costs, and expenses have been subtracted from turnover.<\/p>\n

If there is no profit left in your business after allowing for these liabilities, you cannot issue dividends. If you do, the dividend will be deemed illegal and you could face severe consequences from HMRC. Salaries, however, can continue to be paid even if your company is making a loss, since this kind of payment is viewed as an allowable business expense.<\/p>\n