What is a dividend

What is a dividend?

“You can take a dividend” – That’s great, but what is a dividend?

The business world can be a big scary place, where people use lingo that you may not understand. However, some words and phrases sound far scarier than they actually are. We have noticed that the mention of dividends seems to scare a lot of our clients and having an accountant explain them can often lead to more confusion.

So, we thought we would let you in on the basics!

The definition of a dividend

“A dividend is a sum of money that a limited company pays out to someone who owns shares in the company.”

Dragons Den

To be able to take a dividend, you must be a shareholder owning a percentage of the company. You know on Dragons Den when they are haggling over percentages of the company ….. that’s the shares on which a dividend can be paid.

Limited companies can only pay dividends if they have enough accumulated profit, also known as retained earnings,  in the business to do so. The dividend payment comes out of profit after corporation tax. Even if the company has enough cash to pay a dividend, it is illegal for the dividend to be paid if there is no available profit.

Dividends should be distributed according to the percentage of company shares owned by each shareholder. So, if you own half the company’s shares, you should receive 50% of each dividend distribution.

How to take a dividend

The profit that the dividend is paid from can be from the most recent accounting period or from a previous accounting period, but the directors must have board meeting to minute they have checked there is enough profit available for distribution before they allow any dividends to be paid. Permitting a dividend to be paid is called ‘declaring’ a dividend.

If you are the only person … you still should have a meeting with yourself to check that there is enough profit in the business to take the dividend. Don’t worry, you don’t need to talk to yourself, just complete the check.

To be able to check if there is enough profit in your business to take a dividend. Your books HAVE to be up to date.

For every dividend payment your company makes you need to issue a dividend voucher to each shareholder that shows the following:

  • Date the dividend is paid
  • Company name and number
  • Name and address of the shareholder
  • Amount of the dividend and the number of shares held, including the rate and class
  • The dividend certificate number
  • The company year end the dividend relates to
  • Whether it is an interim or final dividend
  • Signed by an office holder

A copy of the voucher should be given to all recipients of the dividend amount and a copy kept for company records.

How dividends work

Stay with me here, there are some numbers;

Tokyo Ltd makes a profit of £1,000 in this current year. There is also some profit saved from previous years of £3,033 of which corporation tax has already been taken.

Thumbs up
Shrug sholders

Silene is the only shareholder of Tokyo Ltd and decides she wants to take a dividend. She sits down and works out that she can take the previous years profit as a dividend. She then works out she can also take the profit from the current year as a dividend, providing she accounts for the corporation tax. She takes away 19% of the £1,000 leaving £810 that can be taken. In total Silene takes £3,843 as a dividend.

She then created board minutes and a dividend voucher for her records. Silene is happy as she can now afford to go on that holiday that she wanted to book.

Plane tickets

How are dividends taxed

The limited company does not need to pay tax on the dividend. However the shareholders taking the dividend may have to pay tax personally dependent on their personal circumstances through their self-assessment tax return.

The limited company and the shareholder taking the dividend won’t need to pay national insurance on the dividend taken. This is why many business owners take a small salary and dividends.

Everyone gets a personal tax free allowance of £12,570 (for the year 2021/22), you can then earn an additional £2,000 in dividends before you pay any income tax on your dividends (for the year 2021/22). Once you have used up your personal allowance and the tax-free dividend allowance of £2,000 any further dividends received from any source will be taxed.

The amount of personal tax you pay on income from dividends is based on your tax band. The rates you pay are lower than the income tax rates you would receive if taking a salary, which is why it can be a tax-efficient way to pay yourself as a shareholder. Here are the rates:

Basic rate tax payer- 7.5%

Higher rate tax payer – 32.5%

Additional-rate tax payer – 38.1%

So in conclusion, taking a dividend can be a great way to pay yourself as a shareholder if your business is making a profit.

business person

How to handle a client enquiry: the 4 step-guide

How you handle a client enquiry can determine whether that prospect converts into a lead or whether they go elsewhere. It’s true, we all remember first impressions. To help you make the best first impression that you can, here is a solid sales process that you should follow.

Step 1: get their contact details

Your prospect has either emailed you, called you or walked into your office, so contact has been initiated. Before you do anything else, make sure to get their landline AND mobile number.

This is essential for when you get to the follow-up stage, as people are more likely to respond to a text message rather than an email or missed phone call.

Step 2: book a pre-qualification call

The receptionist or anyone in your team can do this 10-minute call (if you have a pre-qualification script that they can follow). This is where you pre-qualify your lead by asking specific questions. Are you talking to the decision-maker? Are they a good fit for your business?

If they aren’t a match for your business, try to help them by referring them to another business that does fit.

Step 3: book a discovery meeting

For prospects who fit with your business and who you want to work with, book a discovery meeting with them. Give them some pre-work before the meeting such as sending you information that will help you get to know them for the meeting. This will show you if they are serious about moving forward and it will weed out any price-sensitive shoppers who are just looking for a free service.

During the meeting, you should use the information that they gave you to find out more about them. Ask open-questions for the first half of the meeting to identify their specific goals, interests, challenges, and fears. When you know and understand their emotional drivers, only then can you effectively move on to the ‘selling’ portion of the meeting. I.e. positioning your business as their solution. This is where you will discuss potential solutions with them.

Step 4: send the proposal and follow up

Don’t wait too long to send the proposal over to the prospect. If you’ve made a great first impression and triggered the right emotions during the meeting, you need to strike while the iron is hot.

Create and send the proposal to the prospect as promptly as you can (same day is best) and then follow up until this is signed.

Turn your enquiries into leads

Streamlining your enquiry process will save a lot of time and hassle for you and it will make you appear very professional and organised to your prospect. Making a great impression from the get-go results in benefits for you both, so follow these steps and you’ll be turning more enquiries into leads and clients than ever before.


5 reasons why you should be publishing blogs regularly

Do you publish new content on your website regularly? If you don’t, you should be.

Blogging is an integral part of any effective digital marketing strategy. According to SEO expert, Neil Patel, companies that blog generate 67% more leads than those who don’t! Here’s why you should be prioritising your content.

To appease Google

If you satisfy search engines like Google by publishing regular, high-quality content, you will appear at the top of their search results. Improving your search engine ranking is key to driving traffic to your website and getting conversions.

To help your audience find you online 

If you write regular content which is optimised for the keywords that your audience will be searching for, you will help your audience find you. For example, if you know what their pain points are (e.g. how to manage money), you can write helpful articles that appear on the first page of results on Google.

To keep your readers coming back

If you only write now and then, your audience won’t remember you and your brand. You won’t stay in front of them until they are ready to buy. If you’re publishing useful and relevant content every week, they will keep coming back to read more. Just like a favourite author or magazine, they will know your brand and will want to read what you write.

To build trust and position your business as the expert 

You can use your content to demonstrate and share your knowledge with your audience, and ultimately, to position yourself as the expert in that field. If people see you as the thought leader in your field (and they trust you, because you publish useful content, regularly), they are far more likely to buy from you.

To create content for social media

Many business owners don’t know where to start or what to post when it comes to their social media strategy. If you write and publish regular blogs, however, this can generate a lot of content for you to use on your social channels. Not only does it increase your online presence, but this increases your reach and gives you another avenue to drive traffic back to your website too.

How often should you publish blogs?

Once a week is more than enough for most businesses. You want to be blogging regularly enough that you reap the rewards of the effort but not too much that you can’t manage to fit it into your busy working week!

Just remember, you need to be blogging as content creates trust and credibility; it makes Google happy, and it positions you as the expert (which ultimately leads to results!).

how to have more gravitas as a leader

How to have more gravitas as a leader or manager

“Gravitas” was one of the ancient Roman virtues that denoted “seriousness,” but nowadays it’s a quality that also extends to self-confidence and a strong presence. You know the types of people. The ones who talk the talk, who seem to command attention when they walk into a room, who, when they talk, people can’t help but listen. These people have a lot of gravitas.

It can be annoying when someone who has this presence steals the limelight, but what is great about gravitas is that it can be learnt! Just like everything else, confidence is a skill and the more you practice it, the more naturally it will come.

If you want to have more gravitas or confidence as a leader, here are 6 things that you need to do.

1.Stand up straight with your shoulders down

Your posture and body language is absolutely crucial when it comes to the presence that you are projecting. For example, if your voice is strong but your shoulders are hunched and you’re looking down, people will perceive you to be closed off and shy.

If you want to appear more confident and have a greater presence, open up your chest, stand tall and make direct eye contact. So much of what people call gravitas is actually just their reaction to the other person’s body language. Take stock of yours and make sure you are projecting outward confidence.

2. Use direct language

You need to reinforce your body language with how you talk, so make sure that you’re not using passive language. Saying things like “I just think that…”, “Maybe if I…” or “Am I making sense?” will undermine your authority, credibility and confidence. If you want more gravitas, you need to think about the language you use. Replace passive phrases with active and direct phrases such as “From my point of view… The truth is… What is your stand on…”

3. Dress the part

Now you’re walking the walk and talking the talk, you need to look the part. Gravitas often comes from people who just look the part, so think about how you can dress and present yourself to project the image you want. For men, it may be a suit and shined shoes or a trimmed beard. For women, it may be high heels or wearing your hair up and off your face.

If you struggle with confidence, looking the part can help you feel it.

4. Overcome your self-limiting beliefs 

Identify any self-limiting beliefs that are reducing your gravitas. This could be always saying yes to requests, letting others influence your decisions instead of you making the final call, and/or letting others speak over you.

Behaviours such as this often come from self-limiting beliefs about yourself such as not feeling good enough or like an ‘imposter’ in your role. Identify these so that you can start making impactful changes.

5. Pace your words and emphasise key points

When presenting or in meetings, think about the great orators of our time (e.g. Barack Obama, Winston Churchill etc). They make short, sharp points; they take their time over their words and say them with conviction, pausing for impact, and they put emphasis on certain keywords and phrases that they want you to remember.

If you want to have more gravitas, where your team hang on to your every word, make sure you do these three things when conversing and presenting.

6. Always prepare before key meetings or conversations

Obama and Churchill didn’t wing their speeches, they prepared for them. Not only were their speeches carefully crafted and each word chosen carefully, but they also practised delivering the speech.

Most of us prefer to have time to think before answering a question, rather than having to think on our feet, so give yourself this time. Prepare before key meetings or conversations and it will be far easier to converse and answer with confidence.

notepad and pen

What finance is available for small businesses in 2021?

Just thinking about how much the government has forked out during the COVID-19 crisis is scary; never mind hearing the numbers (it was £284 billion at the end of 2020, just FYI). But the funny thing about the economy is that you have to borrow to build.

Small businesses have relied on government-backed financial support this past year, with schemes such as the Business Interruption Loan Scheme and the Bounce Back Loan Scheme keeping them afloat. However, the time has come to tighten eligibility, so these came to end as of March 31st.

The wounds of the pandemic are still being felt for many, so the question is then, what help is available to get through this next stage?

What are your needs?

Before you look at the options available, it’s worth thinking about what will be the most beneficial to you. Do you need immediate short-term support or medium-term financing? Will a one-off payment be enough or will you need finance again at some stage in the near future?

Once you know what your needs are, you can look at what new financial support schemes are available and choose the one that suits you best.

Financial support

  • The Recovery Loan Scheme – replaces the loan schemes that have just closed, and the government will guarantee up to 80% of loans from £25,000 to £10m. The scheme is open until 31st December 2021.
  • Restart Grant Scheme – a £5bn fund set up for non-essential retailers and hospitality and leisure businesses. If eligible, they could receive grants of up to £6,000 and £18,000 respectively, per premises.
  • Business rates relief – businesses in the retail, hospitality and leisure sectors in England will not have to pay business rates for the 2020 to 2021 tax year. Check eligibility here.
  • Self-Employment Income Support Scheme – to claim the fourth grant, you must be a self-employed individual or a member of a partnership. You also have to show evidence that supports a reduction in business activity, capacity, demand or inability to trade due to Coronavirus between 1st February 2021 and 30th April 2021.

Keep yourself informed & seek advice

2021 is looking better than 2020, but it’s still a rough road ahead. Especially for businesses. To help plan for an uncertain future, always keep up to date with announcements, check the Gov.uk website, and always consult your financial advisor for advice before applying for a scheme.