How to pay dividends from a UK limited company: the paperwork

A dividend from a UK limited company needs profits the law allows it to distribute and a written record that the directors decided to pay, both in place before any money moves. Miss either and the shareholder may have to repay it.

I spent part of this month checking how to pay dividends from a UK limited company against the Companies Act 2006, the model articles and HMRC's own manuals. The GOV.UK summary is the shortest document in that pile.

Its first rule is about money, not forms: “Your company must not pay out more in dividends than its available profits from current and previous financial years.” The paperwork rules follow in the same section.

For an owner living abroad, the company law steps are the same as for anyone else. The tax answer at the end is different, and I come to it last.

My advice comes before the detail. Do not move money labelled as a dividend until the profit check and the decision both exist on paper, because those two documents are what show the payment was lawful.

Can the company legally pay a dividend at all?

Only if it has profits available for distribution, and the Companies Act defines those narrowly. Section 830 opens with the rule: “A company may only make a distribution out of profits available for the purpose.”

The same section sets the measure as accumulated, realised profits not already distributed or capitalised, less accumulated, realised losses not already written off. Accumulated is the word that matters.

HMRC's Company Taxation Manual reads the section the same way. It adds that the current year's position cannot be taken in isolation, so a profitable year does not cure losses carried forward from earlier years.

Realised is the other word with a precise meaning in that test. The same manual says realised profits include trading profits and gains on selling capital assets, but not an unrealised gain from revaluing an asset. A company that has only revalued its office has not, as I read it, earned a dividend from that alone.

Which accounts count is settled by section 836. Normally they are the last annual accounts, but interim accounts may be used when those would block the dividend.

New companies get a third option. Where a distribution is proposed during the first accounting reference period, or before any accounts for it have been circulated, section 836 allows it to be justified by initial accounts instead.

I flag that clause for every newly formed company run from abroad. Any dividend it pays before its first annual accounts are circulated falls under that clause, so initial accounts are the basis the Act offers.

Private companies get more room here than public ones. The manual says so directly: “For private companies there are no similar statutory requirements relating to either interim or initial accounts.”

What remains is the test in section 838. Interim accounts must allow a reasonable judgment of the profits, losses, assets and liabilities that decide the question, and the format can differ from the annual accounts sent in with the tax return, according to the same manual.

A second dividend from the same accounts has to count the first. The manual points to section 840 for that rule, so two interim payments cannot both lean on one untouched profit figure.

Corporation Tax gives no help in the calculation. GOV.UK states that dividends cannot be counted as business costs when the company works out its Corporation Tax.

Who decides on a dividend, the directors or the shareholders?

Under the model articles both do, at different stages, and the type of dividend decides which body acts. Article 30 of the model articles for private companies limited by shares says: “The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends.”

So a final dividend needs an ordinary resolution of the shareholders. The same article caps it: “A dividend must not be declared unless the directors have made a recommendation as to its amount.”

The board can decide an interim dividend alone.

Every dividend must also follow the shareholders' respective rights, and unless the resolution says otherwise it is paid by reference to holdings on the date of the decision. GOV.UK adds that dividends must usually be paid to all shareholders.

Company law itself does not say who declares a dividend. HMRC's manual notes that the Companies Acts leave this to the articles, so a company with bespoke articles may follow different rules from the model.

That makes the articles the first document I open, before any figure.

A sole director is not stuck in this process. Reading further in the model articles, I checked article 7, and it lets a company with one director, and no rule requiring more, take decisions without the usual board procedure.

GOV.UK still expects the meeting to be minuted, “even if you’re the only director”. In a one-person company I would read that as a written decision signed by the person who is both board and shareholder.

What should board minutes, dividend voucher and records show?

Board minutes record the decision, and the dividend voucher records the payment. GOV.UK treats both as required, saying that to pay a dividend the directors must hold a meeting to declare it and keep minutes of that meeting.

Nothing in the sources I read prescribes the wording of the minutes. I would still record which accounts the directors relied on, since section 836 makes those accounts the test, along with the amount per share and the payment date.

The voucher has a fixed minimum. For each payment, GOV.UK lists the date, the company name, the names of the shareholders being paid and the amount of the dividend.

It also says where the copies go: “You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.”

I have not found the word voucher in the sections of the Companies Act I read. The duty to write one comes from the GOV.UK guidance, while the duty to keep minutes comes from the Act itself.

Section 248 is short and strict about board minutes. Its second subsection says: “The records must be kept for at least ten years from the date of the meeting.”

Failing to keep them is an offence by every officer in default.

Shareholder decisions carry their own record under section 355, covering written resolutions and minutes of general meetings for the same ten years. Model article 15 adds the same written record for directors' decisions.

When is a dividend treated as paid?

Tax law treats a dividend as paid on the date it becomes due and payable. That date depends on whether it is final or interim, and HMRC's Savings and Investment Manual traces the rule to section 1168 of the Corporation Tax Act 2010.

Final dividends turn into debts quickly. One with no payment date becomes a debt on the day it is declared, while one with a later payment date becomes due only when that date arrives.

Interim dividends work the other way. The manual explains why: “An interim dividend can be varied and rescinded at any time before payment”, so it counts as paid only when the money reaches the shareholder or is placed at the shareholder's disposal.

That includes a loan account credit. HMRC's Company Taxation Manual treats a credit the shareholder can draw on as payment, and expects it at the point when the entries are made in the company's books.

Take a hypothetical one-director company that resolves an interim dividend in March but posts the entry only when its accounts are drawn up after the year end. On the reading in that manual, the dividend then falls into the later period.

Payment itself can take several forms. Model article 31 allows a transfer to a bank or building society account the recipient specifies, a cheque, or another method agreed with the directors.

No interest is payable on a dividend under model article 32 unless the share terms or another agreement say otherwise, and under article 33 unclaimed dividends can be used by the company until claimed. The entitlement ends after twelve years.

Waivers have a strict window in HMRC's reading. The manual states: “The waiver of a dividend is only possible before payment.” Under model article 35 the waiver is a written notice to the company, signed by every joint holder where there is more than one.

What happens if a dividend turns out to be unlawful?

The shareholder may have to give the money back. Section 847 applies where the member “knows or has reasonable grounds for believing” that the distribution broke the rules, and it makes that member liable to repay it.

In a company run by its own shareholders, that test is close to automatic. HMRC's manual says of director shareholders that “such a member ought to know the status of the dividend and it is expected that S847 will apply in the majority of such cases”.

The manual page is long, and I read all of it for this note. Its tax consequences follow the company law, and it treats the money as held on constructive trust for the company, so it is not the shareholder's income at all.

For a close company, the same passage says the payment is regarded as a loan to the shareholder under section 455 of the Corporation Tax Act 2010. Repaying it brings relief, in cash or by a loan account entry.

Two details in that guidance cut the other way. HMRC officers are told not to go looking for unlawful dividends unless avoidance is involved, and a dividend paid on properly prepared interim accounts stays lawful even if the annual accounts later show too little profit.

I keep thinking about that second detail. It turns interim figures from a formality into the one document that protects a mid-year dividend.

How is a dividend taxed for a shareholder who lives abroad?

The company pays nothing on the dividend itself. GOV.UK puts it in one line: “Your company does not need to pay tax on dividend payments.”

UK residents get a £500 dividend allowance each year. Above that, the rates for the tax year from 6 April 2026 are 10.75% at basic rate, 35.75% at higher rate and 39.35% at additional rate.

Those first two rates are new this year. HMRC's tax information note of November 2025 raised the ordinary and upper dividend rates to these levels from April 2026.

Reporting has its own threshold for UK residents. A taxpayer with dividend income over £10,000 needs a Self Assessment return, according to GOV.UK.

Non-resident shareholders sit under a different rule. HMRC's helpsheet HS300 for 2026 says that “the tax charge for non-residents on investment income arising in the UK is restricted to the amount of tax, if any, deducted at source”.

Dividends from UK companies are on its list of disregarded income. Where the limit applies, personal allowances are not given against other income, and the helpsheet notes that some people come out better by paying tax as if they were resident.

The restriction also stops short of one case. It does not apply in the overseas part of a split year, so a director who moves abroad partway through a tax year needs the dates checked.

I read the helpsheet and the GOV.UK line together, and as I read them an ordinary UK dividend to a non-resident carries little or no UK Income Tax. My guess is that most of the real tax falls where the shareholder lives.

The helpsheet itself says it is only an introduction. I would keep a copy of each voucher with the shareholder's own tax papers too, since it is the one document that shows the date, the payer and the amount together.

What do the official sources leave open?

The form of the paperwork is mostly left to the company. GOV.UK names four items for the voucher and requires minutes, but no page I read sets a template for either document, and I do not know of an official one.

The interim accounts test is just as open. A reasonable judgment is the standard for a private company, and I could not work out from the manual how much detail HMRC would expect if it ever asked to see the figures behind a dividend.

HMRC's manuals are internal guidance, written for its own officers. They describe how HMRC applies the law, and the CTM is frank that whether a dividend is unlawful is not a tax issue but a company law one.

Foreign tax is the largest gap for this readership. HS300 limits the UK charge, but it says nothing about how a dividend is taxed where the shareholder lives, or about any treaty.

An accountant can confirm the company's distributable reserves before each dividend. A tax adviser in the shareholder's country can confirm the position there, and where the articles are not the model ones, a solicitor can read them first.

How to pay dividends from a UK limited company, in order?

My view of how to pay dividends from a UK limited company is that the safe order is short and fixed. Profit test first, on accounts the directors can point to, then the board decision and its minutes, then the shareholder resolution for a final dividend, then the voucher and the payment.

Minutes and resolutions behind those steps must be kept for ten years.

The dividend shows up again at the year end. HMRC's manual notes that it will be reflected in the accounts and that the shareholders must approve them, so in an owner-managed company the same people end up checking their own decision.

I still cannot square the firm tone of the GOV.UK page with how little it actually prescribes. A director can follow every line of it and still hold minutes that say almost nothing about the profit figure, the one point section 836 cares about.