How often should you take dividends out of your limited company?

With dividend tax allowances now much lower than they once were and tax rates higher, the timing of dividend declarations is more relevant than ever for company directors.

In this guide, Patrick Gribben from Intouch Accounting answers two of the most frequently asked questions from our visitors about the timing and tax point of dividend declarations.

1) When I declare dividends, when are they actually taxed?

Is it the declaration date or the payment date?

Neither is always the correct answer. A dividend is reported on your tax return based on the date it becomes due and payable, which is the point at which the shareholder has an enforceable right to it.

For example, declaring a dividend on 1st April 2025, payable on 7th April 2025, means the dividend will fall into the 2025/26 tax year for tax purposes, as it becomes due and payable on 7th April (after the 5th April tax year end).

If the amount was paid on 4th April, before the stated payable date, this early payment would not change the tax treatment – the dividend is still taxable in 2024/25 as the payment occurred before the 5th April tax year end.

Interim dividends and payment timing

It’s important to note that interim dividends can usually be varied or withdrawn before payment, unless they specify a fixed payable date.

Where no specific payable date is stated, interim dividends are typically treated as becoming taxable when they are actually paid or placed unreservedly at the shareholder’s disposal.

However, if a fixed payable date is specified in the dividend resolution, the dividend becomes taxable on that date, regardless of when payment occurs.

You should retain copies of all dividend vouchers and minutes supporting the dividend to prove the timing to HMRC if they ever investigate.

Your accountant should be able to provide you with a template to use, and then send them copies each time for their records. Alternatively, you can download board meeting minutes and a dividend voucher template here.

Read our guide to interim vs. final dividends.

Using dividend timing for tax planning

There are tax planning opportunities here too.

If you don’t want to physically pay yourself a dividend at a set point in time, but you still have some of your basic rate tax band remaining and the company has sufficient profits, you can declare a dividend that is immediately payable with the intention of drawing the cash at a later date.

This creates a debt owed by the company to you as a shareholder, which will appear on the company’s balance sheet. The dividend falls into the tax year based on when it becomes payable, allowing you to make full use of your tax allowances year on year.

The dividend allowance

As part of an overhaul of dividend taxation, a dividend allowance was introduced from 6th April 2016. The allowance is now £500 per tax year, meaning the first £500 of dividend income is taxed at a zero rate.

Because of this, it is generally advantageous to take at least £500 in dividends in the tax year, regardless of the tax band you fall into.

You can find out how much dividend tax you will pay using our salary and dividend calculator.

2) How often should I take dividends?

Do regular dividends look like a disguised salary?

You can pay yourself dividends as often as you like, although we generally recommend monthly or quarterly payments.

As long as you have the correct paperwork in place, including dividend vouchers and minutes, and the company has sufficient distributable profits to cover the dividends, there is little danger that HMRC could successfully argue that the payments are salary.

We advise clients to keep dividend and salary payments separate and to pay each shareholder in the correct proportions, to maintain a clear audit trail.

Having clear, concise records makes HMRC reviews much easier, as it allows every transaction to be traced and provides reassurance that nothing inappropriate is hidden in poor record-keeping.

Original article lightly updated by the ITContracting team in 2025