Dividend
Plain-English definition of Dividend — part of our running a business glossary.
Definition
A dividend is a cash distribution from a company to its shareholders, typically paid from profits. UK dividends are taxed at lower rates than salary for Ltd company directors paying themselves — currently 8.75% (basic), 33.75% (higher), 39.35% (additional) above the £500 dividend allowance.
Why it matters
Small-business tax is not optional paperwork — it is the structural choice that determines how much of your gross income you actually keep. The gap between a well-structured limited company and a poorly-run sole trader on the same turnover can easily run to five figures per year.
Common mistake
Treating the business bank balance as personal take-home. Retained profit is not the same as disposable income, and dividend tax plus corporation tax is still owed even if the cash is sitting in the company account.
Calculators that use this concept
See also
- VAT (Value Added Tax) — VAT is a consumption tax currently at 20% standard rate in the UK. Businesses with taxable turnover above £90,…
- Corporation Tax — Corporation Tax is the UK tax on Limited company profits — 19% on the first £50,000 of profit, tapering up to …
- APR (Annual Percentage Rate) — APR is the yearly cost of borrowing, expressed as a percentage of the amount borrowed, including most fees. A …
- AER (Annual Equivalent Rate) — AER is the savings equivalent of APR — the rate of interest you earn on a savings account assuming interest is…
- SDLT (Stamp Duty Land Tax) — Stamp Duty Land Tax is the UK tax on residential and commercial property purchases in England and Northern Ire…