Dividend Vouchers and Board Minutes: What You Need

Every time a limited company pays a dividend, it needs two pieces of paperwork: minutes of the directors' decision to declare it, and a dividend voucher for each shareholder. This applies even to a one-person company. Without them, and without enough profit to cover the payment, what you thought was a dividend may be treated as something else, with a different tax result. Here is exactly what to prepare and when.

Key takeaways

• A dividend can only be paid out of profits available for distribution.
• Directors must declare the dividend and minute the decision, even if there is only one director.
• Each dividend needs a voucher showing the date, company name, shareholder names and amount.
• Dividends are paid in proportion to shareholdings, not by preference.
• Prepare the paperwork when the dividend is paid. Never backdate it.

What is a dividend?

A dividend is a payment a company makes to its shareholders out of profit that is left after Corporation Tax. It is a return on owning shares, not a reward for work, which is why it is not a business expense and does not reduce the company's Corporation Tax bill. Many owner-directors take a mix of salary and dividends. Our guide to director salary vs dividends explains how the two compare.

The rules on paying dividends are summarised on GOV.UK under taking money out of a limited company. Two points from that guidance drive everything in this article: the company must not pay out more in dividends than its available profits from current and previous financial years, and there is specific paperwork for each payment.

Step one: check there is profit to distribute

Cash in the bank is not the test. A company can have a healthy balance and no distributable profit, for example because it owes VAT, Corporation Tax and suppliers, or because it made losses in earlier years. Before any dividend, look at up to date figures:

• Retained profit brought forward from previous years.
• Profit for the current year to date.
• Less a realistic provision for Corporation Tax on that profit.
• Less dividends already paid this year.

What is left is the most that can be paid. This is why current bookkeeping matters so much for a company that pays regular dividends. If the books are months behind, nobody can say whether a dividend is lawful.

Step two: minute the decision

The directors decide to pay an interim dividend, and that decision must be recorded. The minutes do not need to be long. They should state:

• The company name and registered number.
• The date of the meeting or written decision.
• Which directors were present.
• That the directors reviewed the company's financial position and were satisfied there were sufficient distributable profits.
• The dividend declared: the amount per share, the share class and the total.
• The date it will be paid.
• A signature from the chair of the meeting or the sole director.

Keep the management accounts or figures you relied on with the minutes. If the decision is ever questioned, they show that you checked before paying.

Step three: issue a dividend voucher

For each dividend payment the company must produce a voucher showing:

• The date of the dividend.
• The company name.
• The names of the shareholders being paid.
• The amount of the dividend.

It is sensible to add the number and class of shares held and the dividend per share, so the arithmetic can be followed. Give a copy to each shareholder and keep a copy with the company records. Company records generally need to be kept for 6 years from the end of the financial year they relate to, as set out in the GOV.UK guidance on company and accounting records.

Interim and final dividends compared

The exact procedure depends on your company's articles of association. Most small companies use the standard model articles, but check yours, especially if you have more than one class of share.

Dividends must follow shareholdings

A dividend is declared per share, so every holder of the same class of share receives the same amount per share. If two people each hold half the ordinary shares, they each receive half of any dividend on those shares. You cannot simply decide to pay one shareholder more this month. If you need flexibility, that is a question about share structure to discuss with an accountant before any payment is made, not something to fix afterwards.

Worked example (illustrative)

"Northgate Design Ltd", an illustrative example, has two shareholders. One holds 60 ordinary shares and the other holds 40. In September 2026 the directors look at the management accounts: retained profit brought forward is £4,000, and profit for the year to date after a provision for Corporation Tax is £30,000. No dividends have been paid yet this year, so distributable profit is £34,000.

They decide to pay an interim dividend of £200 per share, a total of £20,000. The minutes record the date, the directors present, that the accounts were reviewed, and the dividend of £200 per ordinary share payable on 30 September 2026. Two vouchers are issued: one for £12,000 (60 shares) and one for £8,000 (40 shares). The payments leave the bank on 30 September and are posted to dividends in the books, leaving £14,000 of distributable profit.

The company and figures are invented to show the method and are not a real client.

What if you get it wrong?

A dividend paid without enough distributable profit is unlawful. A shareholder who knew, or ought to have known, that it was unlawful can be required to repay it, and in a small company the shareholder is usually also the director who made the decision. Money taken without a valid dividend behind it is often treated as an amount owed back to the company on the director's loan account, which can bring its own tax charges. Missing paperwork also makes it harder to show HMRC that payments were dividends at all and not salary.

Tax on the shareholder

The company does not deduct tax from a dividend. Each shareholder is responsible for any Income Tax due, usually through Self Assessment, after the dividend allowance. Rates and the allowance change, so see the current figures under tax on dividends on GOV.UK and our guide to dividend tax rates and the allowance.

Common mistakes

• Paying first and checking profit later. The check comes before the payment.
• Regular transfers with no paperwork. A standing order labelled dividend is not a dividend unless it has been declared and documented.
• Unequal payments to equal shareholders. Dividends follow the shares.
• Forgetting Corporation Tax. Profit before tax is not distributable profit.
• Backdating documents. Paperwork must reflect what actually happened and when.
• Not telling the shareholder. Without a voucher, the recipient lacks the evidence they need for their own return.

How we can help

Our limited company packages include up to date bookkeeping, a check of distributable profit before you pay, and dividend minutes and vouchers prepared for you each time. Packages start from £75 per month on a fixed fee. See our Limited Company Packages, view our pricing, or contact us.