Dividends

As non-spouses cannot benefit from the exemption available for spouses, it is likely that only dividend sharing with a commercial basis will be acceptable to HMRC.

There are several considerations when appointing your spouse or civil partner as a second shareholder:

Yes - the issue of income shifting was formally clarified in respect of shareholders who are married or in civil partnerships.

The dividend allowance means that you won’t have to pay tax on the first £500 of dividends received in a tax year.

If you are a company director, then you have a legal duty to protect the company’s assets and to carefully consider whether you have sufficient funds to pay its liabilities (for example, upcoming VAT and corporation tax payments) before a dividend can be paid.

Most directors pay interim dividends. These are declared and paid in the middle of an accounting year i.e. before the accounts are finalised.

The shareholders of a company who appear in the register of members are usually entitled to receive dividends on an equal basis. Share classes (or alphabet shares, such as ‘A’ shares, ‘B’ shares etc.) are utilised when a company wants to vary one or all of the core rights so that they do not rank equally.

A dividend is a distribution of post-tax profits of the company to its shareholders. It is payable to all shareholders (of the same class of share) in proportion to their shareholdings and in accordance with the company’s constitution (articles).