The Dividend Process - FreeAgent Users

This is a guide as to the process you should work through when voting a dividend if you are a FreeAgent user

Remember there are always two elements to consider when voting a dividend:

1 - Does the Company have sufficient distributable profits?

2 - Is there an impact on the personal tax of any of the shareholders?

1 - Does the Company have sufficient distributable profits?

• Update all bank account transactions, make sure everything is explained up to the current date. Check the bank balances on FreeAgent agree to your actual bank balances.
• Claim any out of pocket expenses that haven't yet been claimed (these are business costs you have paid for personally - see section 1 HERE)
• Make sure all Sales invoices to date have been raised
• Once you're happy everything is up to date go to "Accounting", "Reports", "Profit & Loss" and on the right hand side choose "Yearly" then "Current year to date"
• At the bottom this will show the Operating Profit for the current year to date, the estimate of the running Corporation Tax liability, any Dividends that have been declared to date and any brought forward distributable profits from previous years. At the very end it will show how much the current distributable profits are. This should be a positive number and assuming it is then this is the maximum dividend you can declare at this point in time. If it is negative then you do not have profits for a dividend.
• We would always suggest to lean on the side of caution and leave some profits in the company
• Before deciding what your dividend will be work through section 2 below

2 - Is there an impact on the personal tax of any of the shareholders?

for the 24/25 tax year (6th April 2024 to 5th April 2025):  

• The first £500 of dividends are tax free (the dividend allowance), then any dividends where your total income including dividends is below the higher tax band (£50,270) are charged at 8.75% personal tax. Any dividends above £50,270 are charged at 33.75% personal tax. There are other rates as your income goes even higher but we'll keep it simple here.
• FreeAgent will show you your running dividend position for the tax year if you go to "My Money", "Dividends"

When you're happy with the amount of dividend to pay you need to make the bank payment from your business bank account to your personal bank account in your banks online banking - use a payment reference that says "Dividend".

When you explain the bank payment on FreeAgent book it to "Money Paid to User" then your name, then "Dividend"

If you are paying more than one shareholder please make separate bank payments to each shareholder and also always keep separate from salary payments. 

You can see your history of dividends by going to "My Money" , "Dividends"

You can download the board minute paperwork by going to "My Money" , "Dividends", clicking on the relevant dividend then save the PDF - you can then print this out, fill in the missing information, sign it and keep this filed.