Newbie - dividends

[moneymoney]

Hello everyone - newbie contractor but I've been reading the forums for a while

I've been contracting for just over 6 months and have got a renewal for the next 6 so that side of things is going well. I'm setup as a limited company and have an accountant looking after the financials for me. So far they have been pretty good, helped me get everything setup, answered my questions in a timely (usually) fashion etc. I pay myself a standard salary of approx <£1k/month. All very standard so far.

I just asked my accountant about dividends and they said i can just transfer the money out of the business accountant and into my personal account whenever i feel like it. This goes against some of what i've read online where I need to make a dividend declaration and have vouchers for that amount etc. Which is correct? (I'm now worried that if my accountant is wrong on this, they might be wrong on other items too).

Hopefully I'll avoid too much abuse as I've spoken to my accountant and I've read the guides........

[northernladuk]

I think what he is saying is yes you can do it whenever you want.... As long as the paperwork is raised. I think he's assuming you knew the paperwork should be done. Saying that I would have liked him to give you some advice. For example IMO first priority is get a watchest of about 3-6 months built up ready for the end of this gig. After that divi as much out up to the tax limit as soon as so you can get it in a higher interest account. If you've got enough to not impact the war chest at the beginning of next year divi the full amount you can (efficiently) and again get it somewhere it's working for you.

I can't believe the number of contractors with huge war chests that still divi monthly over the year... Why???

[NickFitz]

The general procedure for declaring a dividend is to call a shareholder meeting, declare the dividend, and create a dividend voucher for each shareholder showing the gross dividend amount and the tax credit.

In practice, for a single-director company where that director is also the sole shareholder - which I assume is your situation - the procedure is as follows:

1. Lie around on the couch;
2. Realise it would be nice to have £x more money in your personal account;
3. Grab your laptop off the floor next to the couch and check spreadsheet or other records to make sure your company has at least £x in retained profit; if so:
4. Call a shareholder meeting by mentally categorising your current recumbent state as a shareholder meeting;
5. Declare a dividend (it can add to the fun to do this out loud, though that isn't required);
6. Put the date, relevant figures, an image of your signature etc. into a dividend voucher, and send it to your wireless printer (opinions are divided on whether a hard copy is actually required, though, so maybe just save it somewhere safe on your laptop);
7. Declare the meeting closed;
8. Minute the meeting by cut-and-pasting the minutes from last time (updating the date, amount etc.) in a Word doc, or wherever you keep your minutes;
9. Go to YourCo's online banking and transfer £x to your personal account;
10. Relax in the knowledge of a job well done

I find that declaring a dividend takes me about forty-five seconds these days, depending on how fast the bank's website is.

More info at gov.uk;

Note that if you have more than one shareholder, they must each receive a dividend in proportion to their shareholding; but that probably doesn't apply in your case.

Enjoy!

[stek]

I think what he is saying is yes you can do it whenever you want.... As long as the paperwork is raised. I think he's assuming you knew the paperwork should be done. Saying that I would have liked him to give you some advice. For example IMO first priority is get a watchest of about 3-6 months built up ready for the end of this gig. After that divi as much out up to the tax limit as soon as so you can get it in a higher interest account. If you've got enough to not impact the war chest at the beginning of next year divi the full amount you can (efficiently) and again get it somewhere it's working for you.

I can't believe the number of contractors with huge war chests that still divi monthly over the year... Why???

I've got like that, built up the War Chest and carried on as before meaning I'm personally skint.

What I mean is with three kids at uni the normal efficient sal/div plan isn't enough for me, I need more - with enough in the war chest maybe I should take the hit and stop panicking every month lol!

Being a working class Northerner from the arse-end of Bolton I know what it's like to be skint, and all contractors I know personally know, seem to draw the lot out at whatever tax it costs them, maybe I should do the same for a bit at least!

I'm not married so the wife thing doesn't work.

[Contreras]

Ask your accountant to clarify a couple of things...

What about dividend vouchers?

How much can I draw out?

If the answer is don't worry we'll sort it at year end then, yes, there is cause for concern.

If the answer aligns with what NF said then WHS although I would print hardcopies, sign, and scan.

[moneymoney]

thanks for the replies

ok so am I right in thinking there is nothing wrong with what my accountant has advised (no reason for concerns), just it seems like it's not a very helpful/proactive approach. by the sounds of it, it's pretty straightforward for me to produce my own voucher

i have a decent enough warchest built up already, I was getting concerned that my accountant wasn't too clued in as I have some more complicated queries for them regarding pension contributions and qualifying for ER at some point in the future (obviously subject to legislation not changing)