A limited company can distribute its profits via dividends to its shareholders. Once you’ve identified that there are sufficient profits to distribute as dividends, you must then minute the decision to declare a dividend. You must then also issue each shareholder receiving a dividend with a dividend voucher.
The dividend voucher, sometimes also called a dividend counterfoil, acts as a written record – effectively a receipt – showing who got the dividend and how much it was. A company can either produce the dividend vouchers itself or may ask an accountant to do it for them.
The shareholder receiving a dividend must keep the dividend voucher as evidence for tax purposes and, as appropriate, use it to complete their self assessment tax return. The company must also maintain a record of the dividend vouchers produced.
Pay dividends the easy way
Inform Direct helps companies calculate dividend and tax credit amounts for each shareholder. It creates all the necessary dividend vouchers to send on to shareholders once you'd paid them. All for just £10 + VAT.Start now
The dividend voucher sent to a shareholder must show the following information:
- the company’s name and company number
- the type of security (for example “Ordinary shares”)
- the number of shares held by the shareholder
- the date
- the name and address of the shareholder(s) being paid a dividend
- the amount of the dividend paid
- the amount of the associated ‘dividend tax credit‘ (at the rate of 10%, equivalent to one ninth of the net dividend)
- the signature of an officer of the company
While many companies will work from a manual template, software like Inform Direct’s dividend voucher creation tool can make creating dividend vouchers a whole lot easier. Taking you through the process of creating dividend vouchers step by step, it uses shareholder details available from Companies House to save you time. You can create, save and then send professional vouchers including all the right information – branded with the company logo if you choose.
As Inform Direct also keeps a full record of the dividend vouchers you create, not only do you meet your obligations but you also make it even easier to create the next set of vouchers – ideal if a company is paying monthly dividends.
Should dividend vouchers be sent by post or electronically?
Dividend vouchers were traditionally always sent to shareholders by post, and this remains the default option. However, following the Income and Corporation Taxes (Electronic Certificates of Deduction of Tax and Tax Credit) Regulations 2003, dividend vouchers may now be distributed electronically – by email, for example.
Companies do not have to offer electronic dividend vouchers. In some cases, the company’s Articles of Association may even prohibit electronic communication of documents like these.
Companies and their shareholders might opt for electronic distribution of dividend vouchers because:
- It saves on stationery and postage costs
- Dividend vouchers can be delivered instantly
- It removes the risk of a dividend voucher getting lost in the post
- Electronic communication is more convenient for many shareholders
Where it is offered by a company, shareholders will need to opt in to receive electronic dividend vouchers. They may choose to withdraw their consent at any time and instead opt to receive paper dividend vouchers again.
What vouchers need to be produced for regular dividends?
Many companies pay dividends more than once a tax year. The standard approach here is still to provide a new dividend voucher each time a dividend is declared.
However, it’s also permitted to issue a single tax voucher which covers the whole of the tax year. This can save time and postage costs, but if anything reinforces the need for good record keeping – since the dividend voucher sent at the end of a tax year may need to cover a number of dividends for a single shareholder.
What about joint shareholders?
Sometimes a share or shares may be held jointly by two or more joint shareholders.
For a joint shareholder, it’s still good practice to include the name of each separate holder on the dividend voucher. However, only the address of the first named joint holder needs to be shown. You also only need to produce and send a single dividend voucher for a joint shareholding – with the voucher sent to the first named holder, rather than a dividend voucher to each joint shareholder.
Inform Direct calculates the dividend and tax credit amounts for each shareholder and produces dividend vouchers for you to send to them.