Dividend
Glossary
Dividend
A dividend is a distribution of a UK company's post-tax profits to its shareholders, paid in proportion to their shareholding.
Dividends can only be paid out of distributable reserves (cumulative post-tax retained profit). The board declares the dividend; the shareholders receive it. Dividends are taxed differently from salary — there's an annual dividend allowance (£500 from 2024/25), with the excess taxed at 8.75%, 33.75%, or 39.35% depending on the shareholder's overall income band. Owner-managed companies often combine a low salary with dividends to optimise the overall tax bill.
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