How to Pay Yourself Dividends | Dividends Explained UK

Dividends are often the BEST WAY to pay yourself from a Ltd company. In this video, I explain how dividends work, what the dividend tax rates are, share my minutes and dividend tax voucher templates, and explain how to pay yourself dividends from your limited company.

Everyone has an annual dividend tax allowance of £2,000 - this means you can pay yourself £2,000 from your business as a 100% tax free dividend! On top of this, you can also use up any of your unused personal allowance as tax free dividend. Many directors only pay themselves a basic directors salary, for example, for 2020/21 I have been paying myself a PAYE salary of £732 per month (£8784 per annum), which means there is £3716 unused that can be paid as a tax free dividend instead!

Remember, dividends are only payable from current profits or retained / undistributed profits from previous tax years. Unlike PAYE salaries, dividends are not allowable business expenses.

The Dividend tax rates are as follows:
• Basic rate = £14,501 to £50,000 (7.5%)
• Higher rate = £50,001 to £150,000 (32.5%)
• Additional rate = £150,000 (38.1%)

Dividends can be paid at any time through the year - these payments are often called interim dividends. Dividend payments that are made after the completion of the annual accounts are called final dividends.

Do you need to keep minutes and vouchers? This is a personal preference, officially the HMRC state that "to pay a dividend, you must: hold a directors’ meeting to ‘declare’ the dividend AND keep minutes of the meeting, even if you’re the only director". In the video, I share the minutes template and dividend tax voucher template I previously used for my business.

How are the dividends paid? I pay myself via bank transfer and put "Dividend" in the payment reference, this makes it easier to process in my accountancy software.

Do you pay yourself dividends? Let me know in the comments below!

Видео How to Pay Yourself Dividends | Dividends Explained UK канала Honest Money