<p>Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, retained profits are included under the owner's equity section.</p>
What is Retained Profit?
Retained profit is the portion of a company's net profit that remains after dividends have been paid to shareholders, representing accumulated earnings reinvested back into the business. Understanding what is retained profit is crucial for UK limited company directors as it affects corporation tax calculations, dividend distributions, and appears on your company's balance sheet as part of shareholders' equity, helping demonstrate business growth and financial stability to HMRC and potential investors.
Written by Jordan MaceyAAT
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Our small business accounting guide walks through absolutely everything you need to know if you're considering starting a limited company. From different taxes, limited company advantages/ disadvantages, how to pay yourself, and what your key filing requirements are.
- When to register a Ltd company
- When to register for VAT
- How to take money out of your company
- Dividend tax rates
- Limited company expenses & corporation tax
- Annual accounts and deadlines
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