limitedcompany Archives - Page 7 of 14

How to combat Christmas stress in your workforce

Posted on December 14, 2021 | by admin

Although Christmas is a magical time of year full of celebration and quality time with family and friends, it can cause stress too. Beyond just the pressure of gift buying and financial stress, the month is a lot shorter and there’s an increased pressure to meet deadlines, hit end-of-year targets, and attend additional social functions. And that’s not even mentioning the stress that comes with hosting people for the actual holidays!

According to the Health and Safety Executive, approximately 50% of all work-related illnesses in 2019/2020 were caused by stress, anxiety or depression. And that was without the stress that comes with the holiday season. Too much stress at work can lead to bigger problems for your employees – impacting productivity, morale, and wellbeing – so as an employer, you need to think about how you can support your team through this time of year.

To help combat Christmas stress (so that rather than burn out, your employees come back in January refreshed, engaged and motivated to get going), here is an essential checklist.

Your ‘combat Christmas stress’ checklist

1 . Plan Christmas-themed activities

If you have your team in one office, get everyone to decorate together. An easy group activity such as this can be very therapeutic. As well as decorating their own desks, you can also arrange festive activities such as Secret Santa, Christmas jumper day, and of course, the office Christmas party.

If you have a remote team, think about how you can bring the team together and nurture festiveness. Can you send the whole team gifts which will be opened together at the virtual Christmas party?

2. Help staff manage their workload

Time management is a big source of stress in December, so can you help your employees with this? Since the season has fewer work days but the same amount of work, help your employees plan ahead as much as possible so that their productivity isn’t affected.

Another option is to outsource or take on temporary staff over busy periods.

3. Maintain effective communication

Is everyone doing okay? Do your employees need anything from you to make this time easier on them? Make sure to increase your communication with your employees this season or at least maintain effective channels when things get busy.

One of the most important things to communicate during this period is when everyone will be taking their holiday. Help your employees communicate this to each other and also to their clients! If everyone is clear who is off and when in advance, then things won’t build up right before Christmas and your employees can properly switch off without worrying about what they are coming back to.

4. Help staff reduce their financial stress

Financial stress is one of the biggest pressures during December, so think about the ways you can help your employees with this. Can you give your employees an end-of-year bonus? Or other financial rewards such as gift cards or vouchers? Can you recommend finance planning apps for budgeting? Or get a financial expert to come in and run a workshop on “holiday budgeting” or “how to avoid overspending”?

5. Encourage healthy eating and exercise

The holiday season is full of rich, unhealthy foods and drinks, all of which can reduce mood and energy and increase stress and anxiety. If you want your employees to come back in January healthy and raring to go, help them to make wiser food choices.

You can start by offering healthier food at the company Christmas party and encourage the team to compete over the holidays – who can eat healthier and log more steps? Maybe you can all do a food or exercise challenge together?

6. Check for signs of anxiety/depression

Is anyone displaying signs of social withdrawal, anxiety, depression or grief? Keep your eyes open for the tell-tale signs and be prepared to give extra support to these people.

Christmas and New Year can be a lonely time for people, especially for those who have recently lost a loved one, so be aware that some may need alone time while others may feel isolated and will need encouragement to get involved.

Other things you can do is to maximise natural light in the office and encourage employees to take vitamin D!

7. Encourage work/life balance

Can you offer your employees flexible hours or to work from home this season? If your employees can schedule work around their personal lives, you’ll see a huge difference in productivity and wellbeing. Even if it’s a simple as allowing people to work earlier and leave earlier, so they can take care of their children or finish their Christmas shopping. A good work-life balance is essential for mental and physical wellbeing.

Pave the way for a prosperous New Year!

The more you can reduce stress in December, the more productive the New Year will be, so help your employees. Help them manage their workload, their client expectations and their work-life balance. Think about how you can help to reduce their financial stress and always keep an eye out for anyone who is struggling. If you do this, you will combat Christmas stress and you’ll have a full team who switched off during the holidays and have come back refreshed, motivated and raring to go.

What is a Registered Office?

Posted on November 19, 2021 | by admin

What exactly is a registered office?

A registered office is the address which your Limited Company is registered to. This is a legal requirement for all companies that are incorporated in the UK and you cannot form a company without one.

This address will be placed on the public record and will also serve as the legal postal address for letters from Companies House, HMRC, and all other government departments and agencies. It must be a physical postal address that is in the same UK jurisdiction in which your company is registered.

What is a correspondence address?

All directors and persons of significant control for your company will also have to provide a correspondence or service address. This serves a similar purpose to your company’s registered office in that it will be where HMRC, Companies house, and other government agencies send important post, and will be displayed on the public register. We usually recommend keeping the correspondence address the same as the registered office address, however it can be different it you wish.

Can I use my home address?

You can use your home address as your registered office, however if you rent your home you may need permission from your landlord. You should be aware that by doing this your personal address will appear alongside your company on the public register, so we do not recommend this for privacy reasons.

We believe that your company will also look more professional if you are not using your home address as your registered office.

Where else can I use for my registered office?

You are able to use anywhere as your registered office providing you have permission from the property owner. Here are a few ideas of spaces you could use:

Your own office space
An external company that provides this service.
Your home (although we wouldn’t recommend)

If you are a client of ours, you are able to use our office address. This is included in all of our limited company services.

What is a Confirmation Statement?

Posted on November 12, 2021 | by admin

Have you heard your accountant talking about your confirmation statement and been puzzled by what it is? Are you wondering about who needs to file one, when, or how?

Wonder no more! We have all the answers for you. Read on below…

What is a confirmation statement?

A confirmation statement is a yearly statement that is sent to companies house to confirm that all the information they hold about the company is correct and up to date.

This video from the government’s website contains a good overview.

Who needs to file a confirmation statement?

Every Limited Company or Limited Liability Partnership (LLP) needs to file a confirmation statement, even if they are dormant or non-trading. Sole traders and companies that have been officially struck off do not need to file a confirmation statement.

When is my confirmation statement due?

Your confirmation statement is due annually, usually around the same time as your company incorporation date. When you register a company, your 12 month review period starts. Your first confirmation statement will usually be due 14 days after the end of this 12 month review period.

You can file a confirmation statement early, if you have had some changes to the company for example. When you do this, you will start a new 12 month review period and the next confirmation statement wont be due for another 12 months.

You can check when your confirmation statement is due by searching for your company on the companies house register.

What happens if I don’t file my confirmation statement?

You will not receive a fine for missing your filing deadline, however if you do not file your statement within 14 days of the end of your review period, your company and its officers may be prosecuted. Your company can also be struck off the register for failing to file a confirmation statement.

How do I file my confirmation statement?

In order to file your confirmation statement you will need your company authentication code and your login to companies house. The government’s website has more information.

There is good news for all 1 Accounts clients however as this is included in all of our service packages! We will need to confirm with you that no details have changed (we may know this already) and you will receive an email from us once it has been filed and accepted by companies house.

What information needs to be updated?

We will have to confirm the below details are still correct before we file so we may contact you to make sure there have been no changes that you haven’t told us about. However, if you do make a change, please make sure you tell us!

We will need to confirm the following details before we file your confirmation statement

Company directors and shareholders are the same
People with significant control are the same
Company’s registered office is the same

You can also update the following information at the same time as filing your confirmation statement:

Standard Industrial Classification (SIC) code
Statement of capital
Trading status of shares
Exemption from keeping a PSC register
Shareholder information

What if nothing has changed?

If none of your company information has changed then a confirmation statement saying that nothing has changed still needs to be filed so Companies House know the information they have is still correct.

If you have any questions regarding confirmation statements please let us know! We aim to make this process as easy and stress free for our clients as possible.

The autumn 2021 budget

Posted on October 28, 2021 | by admin

Small business owners hopes for some crumbs of comfort from the chancellor in his budget and autumn statement were dashed. The triple hit on small businesses coming from April 2022 is still very much happening.
Watch Paul’s response in this video or keep reading below.

The triple hit?

Hit 1

Corporation tax from April 1 2023 to increase to 25% for companies with profits over £250,000. Companies with profits under £50,000 will be taxed at 19%. Companies with profits between £50,000 and £250,000 will be taxed between 19% and 25%.

Hit 2

The dividend tax rate for basic rate taxpayers will increase from 7.5% to 8.75% from April 2022. Higher rate and additional rate taxpayers will see their dividend tax rates increase by 1.25 percentage points.

Hit 3

In April 2022 all 3 rates of National Insurance Contributions (NIC) will increase by 1.25%. Then in April 2023, the 3 rates of NIC will reduce back down to their current levels and the new Health and Social Care Levy will come into place.

As was leaked this week, small business owners have another hit to their finances….

Hit 4

The National Living Wage is increasing from £8.91 to £9.50 an hour from April 2022.What does this mean for your business? It means that your wage costs – both salary and National Insurance contributions – have increased significantly. We can help you understand what this means for your profits and how income you can safely take out from your business.

So what else was announced in the budget which is relevant for small business owners?

A reform of business rates

A new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022-23. Over 90% of retail, hospitality and leisure businesses will receive at least 50% off their business rates bills in 2022-23.
The government is also freezing the business rates multiplier in 2022-23. This will support all ratepayers, large and small, meaning bills are 3% lower than without the freeze.
From 2023, a new business rates relief will support investment in property improvements so that no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy.

A reform of R&D tax credits

The qualifying expenditure will now include data and cloud computing costs
R&D tax reliefs will at some point be only allowed to be claimed for activities taking place in the UK
Later on in 2021 the government will set out plans to tackle abuse of and improve compliance with the R&D tax reliefs later in the autumn

Other announcements relevant to small business owners:

The Annual investment allowance which was raised to £1m temporarily is now being extended to 31 March 2023. After this point, it will revert back to the £200,000 limit.
The Recovery Loan Scheme will also be extended until 30 June 2022 to ensure that lenders continue to have the confidence to lend to small and medium-sized businesses. Finance will be available up to a maximum of £2 million per business, supporting them to recover from the impact of the pandemic and to grow. The government guarantee will be reduced from 80% to 70% to encourage the lending market to move towards normality as the economy continues to recover.
Vehicle Exercise duty for HGVs has been frozen and the HGV road user levy has been suspended for another 12 months from August 2022.
Apprenticeships funding will increase to £2.7 billion by 2024-25 – the first increase since 2019-20. Part of this funding will include, by May 2022, a new enhanced recruitment service for small and medium-sized businesses to help them hire new apprentices. The £3000 apprentice hiring incentive for employers will be extended until 31 January 2022.
From 2023, the government will introduce exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a new 100% relief for eligible heat networks, to support the decarbonisation of buildings.
Simplification of the Alcohol Duty System. Drinks will be taxed in proportion to their alcohol content.
Pubs serving draft beer and cider will have their duty rates on these drinks reduced by 5%
Fuel duty is frozen at 57.95 pence per litre UK-wide for 2022-23
The duty rates on beer, cider, wine and spirits will be frozen for another year

How to recover your accounts receivables

Posted on September 29, 2021 | by admin

How to Recover Your Accounts Receivables After Covid-19

The pandemic has not been kind to business. Many companies have struggled with poor cash flow, defaulting on payments and many have even gone bankrupt. Even now, businesses still struggle, so, understandably, that the financial situation of most businesses in the world is bleak. With that being said, however, with the high vaccine rollout, Covid-19 IS receding (albeit, slowly).

To plan for post-crisis growth, every business will soon have to assess its financial position. This includes a review of receivables: how much they are owed and how well they’ve managed them before the crisis.

Here is how to recover your accounts receivable to prepare for post-Covid growth.

1. Take an honest assessment of your current business situation

Although the business world is slowly opening up again and life is resuming to some sort of normality, there will be an inevitable lag in business. What this means is that business liquidity isn’t going to improve until 2022.

So how can you prepare for this? First, look at your receivables, specifically how much you owe and what percentage of these will be paid back in the next year. Next, you need to forecast your cash flow to make sure that you can survive this period. Lastly, it’s good practice to segment your portfolio of clients into A, B and C. A are great clients, B are average, and C are the poor payers. Prioritise who you need to chase for cash flow payments.

2. Prepare for different scenarios by improving your processes

Things are changing all the time still, so consider what changes could help your business if a third wave of Covid hits or you experience other technical challenges. How will this impact your business? Could you survive?

To remain financially stable in almost any scenario, you need to improve your processes, especially shifting your accounts receivable set up to recall more reliable payments. You can also reset your accounts receivable to be flexible for the recovery by closely examining payment deferrals and ensuring that payment chasing procedures are followed up consistently. The goal here is to get more customers to pay on time moving forward.

3. Think about customer expectations and invest in tech

Needs and expectations are evolving, especially throughout the pandemic, so the key to recovery is to anticipate these needs. Technology is a big area that a lot of businesses are focusing on and for good reason.

To build recovery-proof receivables in your business, you need to streamline and automate processes. For example, automated invoice reminders, credit control software, and customer payment portals etc.

Prepare your business for whatever comes next

The pandemic recovery is going to be painful, but you can take a few steps to prepare for and quickly react to changing situations. This is the key to post-crisis growth: consistently analysing your accounts receivables and adjusting your processes and operations until you create an adaptive model that aids growth instead of hinders.

How to find purpose in your work (and day) again

Posted on June 15, 2021 | by admin

Are you feeling burned out from the chronic stress that has been our lives over the past year? Perhaps you are run down or fed up of every day feeling the same as we are stuck indoors? Maybe you feel just generally overwhelmed with everything at the moment, as you juggle work and family life at home 24/7?

If you see yourself in any of the statements above, you are not alone. Many have said that they feel bogged down with everything at the moment and don’t really know how they feel. Conversely, many others have said that they feel too caught up in their feelings, whether good or bad, and have lost sight of the big picture.

It’s been an extremely taxing year, so it’s no surprise that many of us have strayed from our purpose. With that being said, however, it’s important that we don’t let this happen for too long.

We all need to feel a sense of purpose. It gets us out of bed in the morning, fills our days with meaning, gives us motivation and energy, and carries us through the difficult times. What many don’t know, however, is that often, purpose is built not found.

4 ways to find purpose in your work (and day) again

1.Connect your work to service

Finding your purpose again can be as simple as asking yourself ‘who do I serve?’ and then shifting your perspective. For example, think about who you actually serve and the benefits they get from the work that you do. Then, consciously and concretely, connect this result to your day-to-day jobs. You may just find that shifting your thinking makes your work more purposeful.

2. Pursue excellence

How can you adapt your job to provide your clients with exceptional service (whilst also making your days more meaningful)? For example, would devoting time to learning a new skill make you happy but also benefit your clients? Enhancing your assigned work to make it meaningful to you and to those you serve is a great way to nurture a sense of purpose.

3. Focus on building positive relationships

Who we work with, who we live with, and who we have in our corner, is just as important as what we do. Therefore, to feel completely happy and fulfilled, we must develop and maintain these relationships. Take some time every week to reflect on your relationships. Whether it’s a colleague or a family member or a friend, try to understand him or her and why you’re grateful to be working with them or to have them in your life. Think of ways that you can help them.

4. Reflect on what matters to you most

You can only find your purpose again if you know yourself, what you want, and what matters to you. If you don’t know this, then this may be why you feel aimless or demotivated. To help you delve deep into what ‘purpose’ means for you, try the following tasks:

Remember your ‘why’ – why do you do what you do? Why did you want to pursue this direction in the first place? Who are you working for if it’s not yourself?
Review your values – if you have role models, what are the qualities/values that you most admire? Do you exhibit these qualities/values or try to in your daily life? Does your work satisfy these values?
Keep a ‘purpose’ diary – for one week, whenever you feel most purposeful or energised or passionate, write down what you were doing at the time and why you felt that way. Review your notes after the week is over and you’ll identify exactly what aspects of your work you find most rewarding.

Purpose is built, not found

Contrary to what many people might think, purpose is something that is built or pursued, it’s not just going to get dropped in your lap one day. If you want to find meaning in your work and find your purpose again, reflect on what matters most to you and work on shifting your perspective. If you think about the people you serve and spend your time improving your skills to provide an even better service, your days will be filled with a lot more purpose.

15 ways to get your mojo back

Posted on June 15, 2021 | by admin

Imagine yourself when you are in the zone. For example, when are you most confident about what you are doing, you’re efficient and effective in doing it, and most importantly, you’re happy and full of energy to get it done? Can you picture these situations clearly?

When you are in this state, the feeling that is driving you is your ‘mojo.’ It might be a different feeling for everybody, but the result remains the same. When you are in the zone and you have your mojo, you will drive yourself forward and ensure your own success.

Now, we all have our good days and bad days, but what many people are experiencing as a direct result of the pandemic, is a severe loss in mojo. As you can imagine, this is a serious issue as we all need our mojo to run our business, lead our teams, serve our clients, and take care of our family and ourselves.

Now you know what your mojo is, the question is, “how can you get it back if you lose it?”

How can you get your mojo back?

Start with one small win – try focusing on doing small things well and you’ll restore your confidence and motivation.
Focus on your mission and values, not your obligations – why are you doing what you do? Link your tasks to what drives you and you’ll find your purpose again.
Surround yourself with positivity and support – stay away from negative thinking, negative people, and negative circumstances (e.g. social media or the news) as much as possible.
Quiet that inner voice – if you judge yourself harshly and doubt yourself often, start to notice when this is happening and shut it down with a positive thought instead.
Ask for help and support if you need it – you don’t have to do everything alone, so don’t be afraid to ask for help or support if you need it. Often, just sharing your burdens can be the biggest boost in getting your mojo back.
Engage in activities that you enjoy – make time for the things that you are most passionate about. They will bring a smile to your face in the immediate and will help build you back up.
Do something you are good at – to regain your self-confidence, do something you are good at. Whether this is supporting your clients or making your children laugh, it will give you the strength and motivation to move on to the next task.
Exercise often – even if you don’t feel like it, engage in some sort of physical activity that you enjoy. Lack of movement will just make you feel sluggish and depleted.
Acknowledge the progress you’ve made – spend some time looking at your accomplishments, you might just realise that you’ve achieved more than you realise.
Reflect on the big picture – are you doing what you really want to do? If you aren’t, what would you want to do instead? If you are, has your direction or vision changed?
Be curious – a great way to get your mojo back is to stimulate your curiosity and creativity. Learn something new or find a new hobby – it might just reset you and give you a new dose of energy.
Practice gratitude – if you’re feeling down, focus on what you have instead of focusing on what you lack. Think of a couple of things that you are thankful for every day.
Get some sun – a little sun can do a lot for your state of mind and your body, not to mention your energy levels. Open the windows, get outside or take Vitamin D every day.
Help others – focusing on generosity and kindness can really create a strong and positive sense of being. Connect with your family more and find ways you can help others.
Put your needs first – sleep for long enough every night, eat and drink healthily, move your body, and take time to recharge and switch off from work. You might have lost your mojo simply because you are burnt out.

How to build your business (not your workload)

Posted on June 10, 2021 | by admin

If you want to build your business (not your workload) and you want to spend time on doing the things that will actually grow your business, you need to stop being a ‘busy fool.’ This means no more firefighting through the days and spending most of your time doing things that don’t contribute to your overall goal.

To build your business, you need to take control of your time and use it wisely. Here’s how.

Invest in the right workflow tools

There are bound to be inefficiencies in your existing processes, so identify them. Where are the bottlenecks in your processes? Can you automate any manual tasks?

One of the best ways to start working slicker is to invest in the right workflow tools. They can make management, collaboration, tracking progress, and daily operations so much more efficient.

Prioritise high-value work

To stop spending so much time on unnecessary tasks, start prioritising effectively. Use the Urgent Important Matrix to do this.

Group your tasks into 4 quadrants:

Q1: Urgent and important – these are emergencies that arise (e.g. missed deadlines, complaints, technical failures, pressing problems etc).
Q2: Important but not urgent – these are the tasks you need to do to grow your business (e.g. goal setting, growth planning, networking, self-development, business development etc).
Q3: Urgent but not important – these tend to be interruptions that take up the majority of your time (e.g. phones, texts, emails, unproductive meetings and reports etc).
Q4: Not urgent and not important – these are distractions that cause you to procrastinate and have no value to your business (e.g. personal phone calls, social media, excessive or irrelevant emails etc).

Once you’ve grouped your tasks, you will know what you need to focus on and what you need to avoid.

Delegate low-value work

Now you have identified tasks that need to be done, delegate the low-value work to your team so that you can focus on the ones that require your level of skill.

If you delegate effectively (i.e. delegating authority as well as tasks), you can be reassured that the day-to-running is ticking along while you’re focusing on the tasks that will grow the business.

Schedule time in the diary for business development activities

You need to invest more time in quadrant 2, doing the planning and budgeting and development activities that will grow your business. You know this, but if you don’t schedule it into your diary, it won’t get done.

If you prioritise these tasks and delegate the rest, you will have time to sit down and focus on them. You just need to find the best days and times where you can work productively and without any interruptions.

Build your business

It really is as simple as that. To build your business, not your workload, you need to follow these 4 steps. When you do these consistently, you’ll find that each day follows a much calmer formula:

DO – those important tasks that need to be done today.
SCHEDULE – the important but not so urgent tasks, so that they will get done.
DELEGATE – the urgent but not so important tasks.
AVOID – the non-urgent, non-important tasks.

Can anyone get a tax enquiry?

Posted on June 4, 2021 | by admin

Each year HM Revenue & Customs (HMRC) undertake an enormous number of tax enquiries into individuals and businesses to check they have paid the right amount of tax. Since 2010 HMRC have strengthened their approach to enquiry work by using wider powers and sophisticated software and consequently a record £36.9 billion of additional tax revenue in 2019/20 up £2.4 billion on the previous year.

Moving forwards we expect to see an even greater increase in the number of tax enquiries as HMRC look to revoke the enormous £350bn government spend through the Covid-19 pandemic, as well as ensuring that measures put in place to support the economy through this period have been utilised correctly by taxpayers.

Tax enquiries can last for months, even years and defending you against HMRC’s detailed questions requires specific expertise and can be time consuming and costly. Indeed the cost of dealing with an enquiry can amount to thousands of pounds, even if no extra tax is payable.

But no need to panic….

All of our 1 Accounts monthly fixed fee services cover the additional professional costs of handling tax enquiries and compliance checks this is through our Tax Fee Protection Service. This is so our clients never have to worry that they will get a huge unexpected bill if HMRC decide to investigate.

As an additional benefit this protection also provides our clients with complementary telephone access to employment, health & safety and general legal advisors, including support from employers with any adjustments made in response to the Covid-19 pandemic.

What is a dividend?

Posted on May 24, 2021 | by admin

“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.”

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.

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.

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.