When a limited company makes a dividend distribution, all shareholders should be given a dividend voucher, which can be in either paper or electronic form.
Once the directors have decided to declare a dividend, the decision must be recorded in the company’s board meeting minutes. The minutes also document the agreed amount of dividends to be paid per share.
What information must a dividend voucher contain?
- The date
- Limited company name
- Shareholder’s name
- The number of shares owned by the shareholder
- The net dividend amount
- The tax credit
- The gross dividend amount
What is a tax credit?
Each voucher should contain the amount of dividend paid to each shareholder, and the ‘tax credit’ associated with the dividend.
This notional tax credit takes into account the Corporation Tax already paid by the limited company on its profits. It represents 10% of your taxable dividend income, and the actual dividend amount the other 90%.
The tax credit is notional in that you don’t actually receive a physical credit. The credit is merely used to increase the paper value of the net dividend for tax purposes.
Shareholders are taxed on the value of the net dividend (the amount declared by the company), and the tax credit. This is known as the gross dividend.
You multiply the net dividend amount by 10/9 to establish the gross dividend amount. The different between the two is the tax credit.
You can find out more about the taxation aspects of company dividends in our guide to dividend tax.
Shareholders need to keep their dividend vouchers safe – the information will be needed to complete your annual self assessment form.
The company must also retain a record of each dividend voucher, and may prefer to produce a single document which also incorporates the board meeting minutes (which are very brief).
The vouchers themselves can either be sent to each shareholder in paper format, or distributed electronically (e.g. via email) courtesy of The Income and Corporation Taxes (Electronic Certificates of Deduction of Tax and Tax Credit) Regulations 2003.