What are dividend vouchers?

A dividend voucher is pretty much like a receipt for a dividend payment.

It is given out by a private or public company which is limited by shares. The purpose is to confirm to those shareholders how much of the profits they will receive at any given time. This could be via an interim dividend, an annual dividend or a fixed dividend, for instance.

Since 2018 the issuing of dividend vouchers has been a legal tax requirement. The vouchers must be issued for every dividend paid within a particular tax year. This can be done every month, quarterly or annually.

The dividend vouchers are then used to verify payments for tax purposes – both by the company and the shareholders when filling in their self-assessment tax forms as dividends are ‘income’ and must be accounted for (more on this later under Dividends and Self-Assessment).

What is a company dividend?

Dividends are a means of ‘dividing’ profits to the shareholders (or investors) of a company. As such, they are usually given out by the company accountant. The dividends are distributed once Corporation Tax has been calculated. The number of dividends an investor receives is based on how many shares he or she owns in the company.

The benefit for the company of doing so means the money is retained for business use (unless a particular investor cashes in his or her shares).

It’s also a tax-efficient way of taking money from a limited company if you are self-employed or a small business owner. That’s because no tax is due (as it would be if the money was being paid to an employee, for instance). A company director can take a low salary and also pay him or herself in dividends to cut back on their tax bill (if it’s below the NI threshold). Because of this, dividends can’t be considered an expense when it comes to the company’s accounts.

What does the dividend voucher say?

On this voucher you’ll find the amount the dividend is worth, together with the signature of at least one company director.

It will also contain the name of the recipient, together with their address. Likewise, the name and address of the company issuing the dividend will be listed, together with the date. The type of shares owned and how much will also be included.

It’s always a good idea to keep copies of these dividend vouchers on file in case a recipient loses their vouchers and needs it for tax purposes.

Why are dividend vouchers really necessary?

Not only is the act of producing dividend vouchers a legal requirement for a company, but failure to do so could result in an HMRC investigation. The outcome could be penalties or, worse still, a finding of tax evasion.

What other proof of dividends is needed?

In addition to the dividend voucher, another way a company can prove it has distributed dividends is by revealing the minutes of a ‘dividend’ board meeting. The meeting is, in any case, another legal necessity since it shows that the board voted for the dividends and that it was approved by a director (or directors) of the company.

Dividends and self-assessment

If you receive dividends you may have to fill out a Self-Assessment form to declare this to HMRC (if you don’t already pay tax this way). This is regardless of whether the dividends came from your own company or another business in which you have shares.

If the dividends aren’t from your company, and the total amount received in dividends is less than £10,000 then it may be possible to ask HMRC to change your tax code. That way you won’t have to fill out a Self-Assessment form.

Tax-free dividend allowance

If you earn £2000 or less in dividends for the tax year 2022/23 then you won’t have to pay any tax on the amount. The following tax year (2023/24) tax year the threshold figure is reducing to £1,000. For the tax year it will reduce even further to £500.

The tax-free dividend allowance is in addition to your Personal Tax-Free Allowance of £12,570.

Get in touch

Here at Black and White we can help you produce dividend vouchers, together with the dividend board minutes for your company. That way you can spend more time concentrating on your business while we do the paperwork. To find out how we can help further, why not have a chat with us? Call the team on 0800 140 4644. Or, drop us a message via our Contact Us page.