There are a few things below to consider when deciding how much dividends to pay. Generally speaking, you should pay yourself as much dividends as possible at the lower rates of tax. However, you may want to pay yourself a small salary first, because this will save corporation tax.

Does the company have enough profit reserves?

A dividend is the payment of company profits to its shareholders. So a company can only pay a dividend if it has enough profit to cover that dividend. A company may have unused profits (or even losses) from previous years, so you need to look at total profit reserves (or retained earnings) rather than just the profit of the current year. Profit reserves are the net profits after tax of a company since it started, minus the total dividends paid since it started. You can find the amount available on an up to date balance sheet report. It will be the Total Equity minus Shares, or called the Profit & Loss Account, or Retained Earnings.

Are there any other shareholders?

Dividends have to be paid at the same rate per share to all shareholders of the same class. If the company has a simple share structure, we can say that dividends need to be paid out in the same proportion as how the company is owned. So if two shareholders each own 50% of the company, a total dividend will need to be shared 50% each. The company will need to have enough profit reserves to cover the total dividend.

How much tax will I pay?

Dividend don’t affect corporation tax, only personal income tax. Every person can receive £2,000 of dividends per tax year, tax-free. This is in addition to your tax-free personal allowance of £12,570 per tax year. So if you have no other income, you could receive £14,570 of dividends tax-free. Otherwise, dividends that fall above these allowances, and below your total income of £50,270 will be taxed at 8.75%. Dividends that fall into your total income over £50,270 taxed at at least 33.75%. These rates and allowances are correct at the time of writing (2022-23).

PandaDoc is an electronic signature service that we use. You don’t need an account. Simply click on the link in every email you receive from PandaDoc and check the document. Then, to indicate your approval, follow the instructions and buttons to e-sign, date, and finish each document. For company accounts there will be at least 4 emails/documents. You can then download the e-signed document, or if someone else still needs to e-sign it, PandaDoc will email you with a link to it once everyone has signed it.

Not normally. We provide a Summary & Review report with your accounts. This explains in detail what is included in the accounts and the accompanying documents. Where necessary, we will add any additional comments, analysis, notes, questions, and tips. If you are on the Annual+ package or higher, and use online accounting we also provide a review every 3 months. On the Annual+ package you’ll need to reply to the email reminding you that the quarterly review is due.

If you have any questions about anything, you can email us, call us, or video call us. You can book an appointment using the link in our email signature.

If you’re in business, it’s important to know your year end date. It’s the date your accounts and tax reports need to go up to every year. So you may need to do some admin such as value your stock. Also, you could take action before the year end to save or delay tax.

If you are a sole trader you probably have a year end date of 31st March or 5th April (treated as the same date by HMRC). If you have a different year end date it will say on the last set of accounts prepared. Different year end dates will need to be changed to the 31st March or 5th April in the next year or two. This will avoid complications when Making Tax Digital (MTD) for income tax starts in 2024.

If you have limited company you can find your year end date online here. Just search for your company and it will say in the Accounts section. The company’s year end date is automatically set to the end of the month the company was registered, plus 12 months. However, this date can be changed by extending or shortening an accounting period. A company can extend its accounting period up to 18 months, once every 5 years. It can shorten its accounting period as often as necessary.

When we do your payroll here is what happens:

  1. Update your payroll account for any changes such as new starters and changes in pay.
  2. Calculate the deductions required, such as PAYE, NIC, and student loans. Also, pension if we do that for you.
  3. Process any leavers and prepare a P45.
  4. Submit the necessary reports (pay run details, P45s) to HMRC every time, and every year.
  5. Email payslips to employees (if we use our own software this only happens if it has been set up on request).
  6. Upload to Iris Openspace the payslips, P45s, pay summary and the employer payment report. Also a pension summary if we do that for you.
  7. At the end of the tax year, we provide the annual summary for you to check and approve, and P60 forms for you to provide to employees.
  8. If necessary we also provide P11d forms when you provide the details soon after the tax year.

First, you need to create an HMRC account, if you don’t already have one.

https://www.access.service.gov.uk/registration/email

Then you need to follow the instructions below. The procedure may vary depending on your account and any recent HMRC updates.

1. Log into your HMRC account

2. Click on Manage account

3. Click on Get online access to a tax

4. Select the tax service you want to add.

5. Follow the HMRC instructions to add each tax service you need

With difficulty! Try first thing in the morning (from 8am). Sometimes they don’t take calls on Fridays. Here are the contact details for the main taxes:

CIS

Corporation tax

Employers

Income tax (including employees)

National insurance

Self assessment (personal tax returns)

VAT

We email you a link to the instructions on how to pay HMRC every time a payment is due. Look for emails from [email protected] with ‘Submitted’ in the subject. The email should also tell you how much we expect you to pay but check the amount is still up to date. It will also either give you the payment reference or explain where to find it.

Here are links to the instructions on how to pay HMRC for each of the main taxes:

Personal tax

PAYE

VAT

Corporation tax

NIC on benefits in kind

So that we can see some of your HMRC account, you need to authorise us as your tax agent. You need to do this for each tax service. If we have sufficient details we can ask HMRC to send you an authorisation code. HMRC will post the code to the address HMRC have for that service. Let us know what that code is.

Alternatively, you can authorise us on your HMRC online account by following the instructions below. The procedure may vary depending on your account and any recent HMRC updates.

1 Log into your HMRC account

2. Click on Manage account

3. Click on Add, view or change tax agents

4. Select the service you’d like to change

5. Select Add an agent or Manage agents

6. Remove any old agents and add us using code: CloudBookAcc-GJ11GU1XV5JG. Click on Continue

7. Click on Add Agent

We will upload all of the payroll reports to Iris Openspace or we’ll let you know when they are available on your accounting software.

If we use our own payroll software and we have set up employee email addresses on it, payslips will be emailed to employees. If so, the employees will have access to their own payslips and other forms e.g. P60. Otherwise, you will need to distribute payslips etc to your employees.

If we use other software, such as Xero Payroll, the payslips will be emailed to employees. You will need to distribute any other forms.