Payin Dividends

Moobag

Hi There

Please can anyone briefly explain the monthly procedure for a director of his/her own Ltd company on how they can pay themselves a low / minimum wage and also a dividend each month.

I am aware of what needs to be done on the PAYE, but was unsure on issuing vouchers etc on dividends and also where do the vouchers come from?

Any help greatly appreciated

BenElliott

The suggestion at this year's CPD mastercourse is that the directors vote themslves a dividend every three months and with a condition that it is paid into their individual Director's Loan Account. The directors, then, are only allowed to withdraw from that account at a rate of 1/3rd in any one month.

So, for example:
2 Directors want £1,000 per month each they hold a directors meeting with proper minutes. They vote themselves a dividend of £6,000 and that is paid in equal measure into the two loan accounts of £3,000 each.

Each director then can only withdraw a maximum of £1,000 each per month but don't put that amount on any payslip. Then, at the end of the company year each director receives a dividend certificate showing the net amount received and the tax credit that has been nominally deducted.

Hope this helps.

Ben

Moobag

Thanks Ben

That has really helped, where do i get the vouchers from, I see from another post that they have done there own! Is there anything that needs to be shown on them?

Michelle

BenElliott

Hello Michelle,

Yes, you can make your own. I use a word pocessor. They just need to show the full name of the company, company number and address, company secretary name, full name of the shareholder, date, amount of dividend paid and tax credit. You can make them as plain or fancy as you like and they don't need to send them anywhere else than to the shareholders.

Don't forget, though, that the recipients of the vouchers will need to enter the value of them onto their tax returns.

Ben:thumbup1:

Moobag

When you say tax credits what do you mean?

BenElliott

All dividends are paid assuing that the amount paid is the net amount, i.e. after the tax has already been deducted. But, since no tax needs to be sent anywhere, HMRC class the tax as a credit to the individual's account to cover the income on dividends so that, assuming a basic rate tax payer, no further tax is payable.

You just need to take the dividend paid, multiplying it by 100/90 and that gives you the "tax credit".

Ben:thumbup:

BIG WAL

Would it not be correct to show the tax credit seperatley on the Dividend Voucher as follows:
Dividend (say) £10000(i.e Amount actually paid)
Tax Credit

BIG WAL

Oops - sorry. Pressed the wrong button before I'd finished

Would it not be more correct to show the tax credit separatly on the Dividend Voucher as follows ?

Dividend (say) £10000(i.e Amount actually paid)
Tax Credit £1111 (Gross including tax credit less amount paid)

BIGWAL

BenElliott

I am basing my dividend vouchers on all those from FTSE quoted companies that I see when dealing with clients.

I must say that most have not said that the dividend is either net or gross, it is just taken for granted that it is net. Some do say "Dividend actally paid" and "Tax credit". Either way it doesn't matter.

Ben

Bluewednesday

All vouchers I have seen, received and sent state dividend and tax credit.

They should be done exactly as Ben explained in his post