When Can New Company Pay Dividends?

Dividends are the most tax efficient way to get income out of your limited company. But dividends can only be paid where the company is making a profit. So what will be the response if HMRC if you pay dividends from a loss-making company?

Having sufficient money in the bank doesn’t mean you can pay yourself a dividend. As it’s actually a distribution of profits, if you don’t have any there’s nothing to distribute. This can be explained by using a newly started company. If you started a company, you would have money in the bank. But on day one of trading you won’t have made any profit so you can’t pay a dividend. So when can you pay dividends?

You don’t have to wait until your annual accounts are prepared before you can say whether you’re in profit. A reasonably accurate figure can be worked out at any time with just a basic accounts system. However, it may be a while before a new company becomes profitable or trading conditions might change leading to losses.

If you have any trouble with any tax, accounting or bookkeeping matter, contact KVS Accountants for advice. KVS acts as tax consultants in Wimbledon, Barnes, Wandsworth, Battersea, Hammersmith, Southfields, Kensington and Clapham


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