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Interim Dividends v Director Withdrawals

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    Interim Dividends v Director Withdrawals

    Assuming, for the purposes of this question, that you always stay within respective limits and thresholds and that your ltd is always in a healthy position to pay all dividends and taxes accordingly:

    Do you specifically, and purposely, match up interim dividends with the actual director withdrawals that you make?

    Let's say you declare a dividend of £3k each month. Do you take a corresponding withdrawal of exactly £3k, or does it end up getting aggregated with other payment activity (you pay expenses personally, you're paid a portion of salary etc) which means your actual director withdrawals might be £1k one week, then £500, then another £2k etc, etc.


    I'm not worried about breaching tax thresholds or my £10k directors loan limit or anything like that - the online accounting software ensures that's not going to happen. It's more about accounting practise.

    #2
    I take dividends whenever I fancy - my salary is enough to cover what I need each month, so dividends are "treats" if you like. I account for everything separately - salary in one payment, if I declare a dividend I draw it all (Unless I'm paying off a directors loan) in another and expenses are dealt with separately again.

    Comment


      #3
      If you are declaring a dividend of £3K per month, you will need to make sure this is credited to the director loan account on the same date. Therefore it is at your 'disposal' to take as you wish.

      As long as you complete this, the dividend would be determined as 'paid'.

      You can then take the funds owed to you at any point. The only thing to consider before making the payment is the loan account balance so you don't exceed this, causing a taxable benefit from a loan account at a later date.

      Comment


        #4
        Originally posted by JRCT View Post
        Assuming, for the purposes of this question, that you always stay within respective limits and thresholds and that your ltd is always in a healthy position to pay all dividends and taxes accordingly:

        Do you specifically, and purposely, match up interim dividends with the actual director withdrawals that you make?

        Let's say you declare a dividend of £3k each month. Do you take a corresponding withdrawal of exactly £3k, or does it end up getting aggregated with other payment activity (you pay expenses personally, you're paid a portion of salary etc) which means your actual director withdrawals might be £1k one week, then £500, then another £2k etc, etc.

        I'm not worried about breaching tax thresholds or my £10k directors loan limit or anything like that - the online accounting software ensures that's not going to happen. It's more about accounting practise.
        When running your own ltd company, everything should be accounted for separately with relevant documentation/paperwork intact. A dividend declaration form/voucher for each and every dividend declared should be kept, proper payroll records kept for salary and details of director loans made by (and repaid to) to company. To have everything jumbled up will be a nightmare if you have a HMRC investigation and have to explain your position.

        Comment


          #5
          Originally posted by Forbes Young View Post
          When running your own ltd company, everything should be accounted for separately with relevant documentation/paperwork intact. A dividend declaration form/voucher for each and every dividend declared should be kept, proper payroll records kept for salary and details of director loans made by (and repaid to) to company. To have everything jumbled up will be a nightmare if you have a HMRC investigation and have to explain your position.
          As well as accounting for everything separately, make sure you actually pay them separately and don't lump together dividend and salary payments, for example.

          Comment


            #6
            Originally posted by Forbes Young View Post
            When running your own ltd company, everything should be accounted for separately with relevant documentation/paperwork intact. A dividend declaration form/voucher for each and every dividend declared should be kept, proper payroll records kept for salary and details of director loans made by (and repaid to) to company. To have everything jumbled up will be a nightmare if you have a HMRC investigation and have to explain your position.
            So let's say a hypothetical month of August looked like this:

            1st August - Train ticket (purchased by director, personally) - £100
            1st August - Lunch (purchased by director, personally) - £6.00
            10th August - Lunch (purchased by director, personally) - £5.00
            14th August - Director Dividend Declared - £500
            20th August - Salary paid to me - £200

            Are you saying I should always make withdrawals such as this:

            14th August - Director Dividend - £500
            20th August - Monthly Salary - £200
            31st August - Monthly expenses reimbursed - £111.00

            Rather than one lump sum:

            31st August - Withdrawal - £811.00

            Or, taking as-and-when I need, staying within all limits etc.

            1st August - Withdrawal - £50.00
            5th August - Withdrawal - £47.50.
            10th August - Withdrawal - £325.00
            25th August - Withdrawal - £58.00
            31st August - Withdrawal - £330.50

            Comment


              #7
              I make separate payments to keep the money trail clearer but so long as there was a proper paper trail, i.e. Expense claim records, payslips and the correct dividend paperwork, I don't see why making one single bank transfer would be a problem.

              You could just as equally credit all of the above to your DLA and thus any payments to yourself are just treated as payments from your DLA.

              Comment


                #8
                Originally posted by jamesbrown View Post
                As well as accounting for everything separately, make sure you actually pay them separately and don't lump together dividend and salary payments, for example.
                Why?

                If your payroll date is say, 27th and you also declare a dividend that day with correct paperwork, what is the problem with making a single payment covering the two?

                Or, alternatively, crediting both your dividend and salary to your DLA, then making a single payment from the DLA later?

                Comment


                  #9
                  Originally posted by JRCT View Post
                  So let's say a hypothetical month of August looked like this:

                  1st August - Train ticket (purchased by director, personally) - £100
                  1st August - Lunch (purchased by director, personally) - £6.00
                  10th August - Lunch (purchased by director, personally) - £5.00
                  14th August - Director Dividend Declared - £500
                  20th August - Salary paid to me - £200

                  Are you saying I should always make withdrawals such as this:

                  14th August - Director Dividend - £500
                  20th August - Monthly Salary - £200
                  31st August - Monthly expenses reimbursed - £111.00

                  Rather than one lump sum:

                  31st August - Withdrawal - £811.00

                  Or, taking as-and-when I need, staying within all limits etc.

                  1st August - Withdrawal - £50.00
                  5th August - Withdrawal - £47.50.
                  10th August - Withdrawal - £325.00
                  25th August - Withdrawal - £58.00
                  31st August - Withdrawal - £330.50
                  August example
                  All expenses can be lumped together as one reimbursement to you but separate payments made for dividends and salary.

                  Comment


                    #10
                    Originally posted by TheCyclingProgrammer View Post
                    Why?

                    If your payroll date is say, 27th and you also declare a dividend that day with correct paperwork, what is the problem with making a single payment covering the two?

                    Or, alternatively, crediting both your dividend and salary to your DLA, then making a single payment from the DLA later?
                    So long as it all tallies up it shouldn't matter, but I split it up to keep things simpler from an accounting point of view.

                    Makes it easier for me to check things, and presumably for my accountant as well.

                    Comment

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