What is a dividend? Generally speaking, dividends are paid to anyone who holds shares in a company. They are paid out of the reserves left in the company once the tax has been removed from the profit.
HMRC has a dividend tax free allowance of £2,000 for the current tax year (2022-23). Dividends are the most tax efficient way of removing money from a limited company as they are subject to 8.75% income tax up to the basic rate and 33.75% at the higher rate. If you earn over £10,000 from dividends you will need to register for Self Assessment and complete a SA100. You will need to register by 05 October in the following tax year and complete your online assessment by 31 January of the following year.