Dividend Calculator with VAT Flat Rate Scheme

Calculate the amount of dividends you could take when using the VAT Flat Rate Scheme.


Chris Andreou

Calculate the amount of dividends you could take when using the VAT Flat Rate Scheme.

Calculating dividends as a company director in a UK limited company involves understanding the available profits, the legal requirements, and tax implications. Here's a step-by-step guide on how to calculate and take out dividends:

  • Check Available Profits: Before declaring dividends, ensure that your company has sufficient distributable profits available. Distributable profits are the profits your company has made after covering expenses, taxes, and other financial obligations. You cannot pay dividends if there are no available profits.
  • Determine the Dividend Amount: Decide how much you want to pay yourself in dividends. Unlike a salary, there is no set limit to the amount you can take as dividends, but it must be within the available profits.
  • Divide Profits Among Shareholders: If there are multiple shareholders in your company, determine the distribution of dividends among them based on their shareholding percentages. The dividend amount should be proportional to their ownership.
  • Check for Legal Restrictions: Ensure that your company's articles of association don't contain any restrictions on dividend payments. Some companies may have specific clauses that limit or regulate dividend distributions.
  • Record the Dividend Declaration: Document the dividend declaration in the company's records, including the amount, date, and the names of shareholders receiving dividends.
  • Declare and Pay Dividends: Once the decision is made, you can declare and pay dividends to yourself and other shareholders. You can do this by transferring the dividend amount from the company's business bank account to the personal bank accounts of the shareholders.
  • Report Dividends on Your Self-Assessment Tax Return: As a recipient of dividends, you need to report them on your self-assessment tax return to HMRC. Dividends are subject to dividend tax. The dividend tax rates may vary depending on your total income, so it's essential to check with HMRC or consult a tax advisor for the latest rates.

For example, there are three dividend tax bands in the UK:

  • Basic rate: 7.5%
  • Higher rate: 32.5%
  • Additional rate: 38.1%

  • Pay Dividend Tax: The tax on dividends is typically payable on the self-assessment tax return filing deadline (usually by January 31st after the end of the tax year in which the dividends were received).
  • Maintain Proper Records: Keep accurate records of all dividend payments and related documentation. This will help with tax reporting and compliance.

It's important to note that tax rules and rates may change over time, so it's advisable to consult with a limited company accountant or tax advisor to ensure that you are complying with the most current regulations and optimising your tax position when taking dividends from your limited company.

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