Dividend Payments In A Limited Company In The United Kingdom
Dividends are not a business cost and can’t be deducted of the business income. The corporate tax rate in the United Kingdom is 19%.
Dividends are payments to shareholders out of the retained earnings of the company.
Companies should issue dividend vouchers for payments of dividends to shareholders and should include the date of payment, the company name, the shareholder details and the amount of payment made.
The company that pays the dividends do not need to pay dividends tax. But the shareholder will need to include the dividends received as part of their Income tax return. The first £5000 dividends received are tax free for the tax year running from 6 April to 5 April the following year.
Above £5000 dividends depends on the tax band that you fall within >> https://www.gov.uk/tax-on-dividends
If you own a limited company and draw money out of the company on a monthly basis, make sure that you keep track of these drawings. When the accumulated dividend payments go over £5000, make sure you start savings for when you need to submit your personal income tax return. Depending on your taxable income, you can be taxed at 38.1% on the dividends received. So make sure you save for this tax expense.