Dividend from small company

Many entrepreneurs set up a limited company for business because it is easy, quick and affordable to incorporate a limited company in the UK. One of the ways they can withdraw money from their companies is through dividends payments. You must declare the dividend from your small company in your self-assessment return.

Before declaring your dividend

Generally, you can only declare a dividend from your small company when you have sufficient profits available for distribution after paying corporation tax.

You will include the dividend declared in your company’s profit and loss account and also in your balance sheet as the dividend payable if the dividend will be paid after the accounting year ended.

Dividend Received

For example, you are the sole director and shareholder of your limited company. Your company made a profit of £100,000 before corporation tax and after your director’s salaries a total of £50,000. The corporation tax rate is 20%. You would like to withdraw £8,000 from your company.

Profit and loss account2021
Profit before tax£100,000
Less: corporation tax @ 20%(£20,000)
Profit after tax£80,000

In this instance, you can pay yourself a dividend of £8,000. Correspondingly, you must declare this dividend received from your limited company in your self-assessment return. You must register with HM Revenue and Customs to get your Unique Tax Reference (UTR) number for filing your self-assessment return.

Dividend allowance

The great news you do not pay tax on the full amount of dividend of £8,000 received. The UK government is kind, understanding and generous to the taxpayers.

Tax yearDividend allowance
6 April 2020 to 5 April 2021£2,000
6 April 2019 to 5 April 2020£2,000
6 April 2018 to 5 April 2019£2,000
6 April 2017 to 5 April 2018£5,000
6 April 2016 to 5 April 2017£5,000
Source: GOV.UK

Tax on dividend

Your company do not pay tax on the dividend you received but you do. The tax you must pay on your dividend received is depending on your total earned income for the tax year and your income tax band. Please note that the income tax band is different from the dividend tax band.

Dividend tax bandTax rate
Basic rate7.5%
Higher rate32.5%
Additional rate38.1%
source: GOV.UK

Calculate tax on dividend

Salary£50,000
Dividend received£8,000
Total earned income for the tax year£58,000
Less: Personal allowance for 2020/2021(£12,500)
Taxable income£45,500
Tax on:
Salary at the basic rate of 20% (£45,500 – £8,000)£7,500
Dividend at the basic rate of 7.5% (£8,000 – £2,000)£450
Total tax bill£7,950

Confirmation statement

Another important document you must prepare for your company is your confirmation statement at least once every 12 months and submit it to Companies House. Failed to file this document may result in your company being struck off the Companies House register.

If you require help with your company accounts and your self-assessment return and confirmation statement filings, please contact our accountants and they will be more than happy to help you.

Pay stamp duty to HMRC

Pay stamp duty to HMRC electronically during COVID-19 pandemic when you buy UK limited company shares. This is a temporary measure in place to stop the spread of the Coronavirus (COVID-19). You must pay your stamp duty within 30 days of your stock transfer form being dated and signed.

How to pay

You must pay HMRC electronically by Faster Payment, Bacs or CHAPS. The HM Revenue and Customs bank details are as follows:

Bank nameBarclays Bank Plc
1 Churchill Place
London
United Kingdom
E14 5HP
Account nameHMRC Birmingham Stamp Office
Account number12001098
Sort code08 32 10
IBAN **GB02BARC20114773618595
BIC **BARCGB22
Source: HMRC

** you would require IBAN and BIC if you are sending payment to HMRC from an overseas bank account.

Email your bank payment info to HMRC

Thereafter, you must email your stamp duty payment info to HMRC to expedite your application.

stampdutymailbox@hmrc.gov.uk

You must provide the following info:

  • The payment reference
  • Payment amount
  • Date of the bank payment made
  • an electronic copy (for example, a scanned PDF) of either your:
    • signed and dated stock transfer form. You can get a stock transfer form from a broker, a lawyer or accountant who deal with shares.
    • the instrument of transfer
    • form SH03 for return of purchase of own shares

Use power of attorney if necessary.

HMRC will accept e-signatures during this coronavirus (COVID-19) secure measures are in place.

HMRC will contact you by email if they have any questions. You will receive a confirmation letter from HMRC by email. No stock transfer forms are currently being stamped.

Read the government guidance here.

Companies House filings during COVID-19 pandemic

Correspondingly, you must register your SH03 with Companies House. You must also send the confirmation letter from HMRC stating the correct stamp duty amount has been paid. Companies House will accept and register an unstamped SH03 form. The letter will not appear on the public register.

Companies House also gear up to support UK businesses during COVID-19 pandemic. They automatically extend your company’s filing deadline. This will help your company to avoid a late filing penalty if you are unable to deliver your company accounts on time. You do not need to do anything. You just need to go to Companies House website to check your new filing deadline.

Concurrently, your confirmation statement filing deadline will also be extended. You would have 6 weeks to file your confirmation statement. Similarly, for the events driven filings, you will have 42 days (6 weeks) to notify Companies House instead of the usual 14 days filing deadline.

In addition, Companies House also created an interim paperless filing service to accept documents which would normally require a live signature.

You are encouraged to file your company documents to Companies House digitally. You can use the web filing service to submit the following documents to Companies House.

To file online, you would require your company’s authentication code. The authentication code is the electronic equivalent of your company’s director(s) signatures. Keep safe your authentication code.

If you require help with your company’s filings, contact Our accountants. They will be more than happy to assist you.

Prefix in front of company number

Companies House uses standard prefix in front of company number for different categories of businesses registered with them.

No prefix for companies registered in England and Wales

A company registered in England and Wales will have a standard 8 digits numbers as your company registration number printed on your certificate of incorporation. There will be no prefix in front of your company number.

For example, Cute Gifts and Flowers Limited’s company number is 08407369.

SC as prefix for Scottish companies

Whereas for a company registered in Scotland, in other words, has a registered office situated in Scotland will have a Prefix of “SC” in front of your company numbers. For example, XYREX LIMITED’s company number is SC234456.

Prefixes for Overseas companies

There are three types of prefixes for overseas companies.

PrefixCompany type
FCFor all overseas companies registered on or after 1 October 2009 and for overseas companies registered in England and Wales before 1 October 2009.
SFfor overseas companies registered in Scotland before 1
October 2009
NFfor overseas companies registered in Northern Ireland before 1
October 2009

You must provide the correct prefix with your company number for your overseas company when completing the Companies House form – OS MG01 to register a charge with the Registrar of Companies.

List of Prefixes used by Companies House

Knowing your company number’s prefix will help you to be transferred to the right department when you are calling Companies House. This saves yours and the Companies House’s staff time.

PrefixCompany type
N/AEngland & Wales Company
ACAssurance Company for England & Wales
ENEuropean Company (Societas Europaea) for Northern
Ireland
ESEuropean Company (Societas Europaea) for Scotland
FCOverseas Company
GEEuropean Economic Interest Grouping (EEIG) for England &
Wales
GNEuropean Economic Interest Grouping (EEIG) for Northern
Ireland
GSEuropean Economic Interest Grouping (EEIG) for Scotland
ICICVC (Investment Company with Variable Capital)
IPIndustrial & Provident Company
LPLimited Partnership for England & Wales
NAAssurance Company for Northern Ireland
NCLimited Liability Partnership for Northern Ireland
NFOverseas Company regd in Northern Ireland (pre 1/10/09)
NINorthern Ireland Company (post partition)
NLLimited Partnership for Northern Ireland
NONorthern Ireland Credit Union Industrial/Provident
Society
NPNorthern Ireland Industrial/Provident Company or Credit
Union
NRNorthern Ireland Royal Charter Companies
NVNorthern Ireland ICVC (Investment Company with
Variable Capital)
NZUnregistered Companies (S 1043 Not Cos Act) for Northern
Ireland
OCLimited Liability Partnership for England & Wales
RCRoyal Charter Companies (English/Wales)
R0Northern Ireland Company (pre partition)
SAAssurance Company for Scotland
SCScottish Company
SEEuropean Company (Societas Europaea) for England &
Wales
SFOverseas Company regd in Scotland (pre 1/10/09)
SIScottish ICVC (Investment Company with Variable
Capital)
SLLimited Partnership for Scotland
SOLimited Liability Partnership for Scotland
SPScottish Industrial/Provident Company
SRScottish Royal Charter Companies
SZUnregistered Companies (S 1043 Not Cos Act) for Scotland
ZCUnregistered Companies (S 1043 – Not Cos Act) for England
& Wales
Source: Department for
Business, Energy
& Industrial Strategy – Uniform Resource Identifiers (URI) Customer Guide

Companies House filings

Generally, organisations registered with Companies House in the United Kingdom must comply with the UK company law. This includes submitting the following documents to Companies House when they are due.

You must also require to notify Companies House when there is a change in your company details like new director appointment or change of registered office address etc.

If you have any questions about your company’s legal filings requirements, contact our accountants. They will be more than happy to assist you.

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