A quick tour of the contents of the dividend voucher and board minutes that FreeAgent generates.
Whenever you post a dividend, either as a payment from the bank account or as a journal, FreeAgent will create a dividend voucher and board minutes. The company must, by law, have a meeting of the board of directors, check that there is sufficient profit in the company to allow for the dividend, and produce this paperwork, every time it declares a dividend, on a timely basis. This applies even if one person is the sole director and sole shareholder of a company.
Once the voucher and board minutes have been created, you need to print them out, fill in the gaps in the minutes which you'll see in just a moment, and have them signed by the chairman, and keep them safely.
Where do I find these in FreeAgent?
Navigate to the ‘My Money’ tab at the top of your screen and select ‘Dividends’ from the drop-down menu.
Select any of the transactions you see there.
The board minutes and voucher appear.
The minutes are at the top. There is, of course, information on these minutes that FreeAgent could not know, such as the names of who was present at the board meeting when the dividend was declared. So you'll need to fill that in when you print the minutes out.
When you're ready to print and sign this paperwork, select Save as PDF.
Save the file to your computer. You can then print it using a PDF viewer such as Adobe Reader or Google Docs.
Tax on dividends from April 2016
From April 2016, new legislation regarding the taxation of dividends was introduced. It abolished the tax credits system and introduced a 0% allowance on the first £5,000 of dividend earnings instead. This £5,000 then fell to £2,000 with effect from 6th April 2018.
The rate you will pay on earnings above this threshold varies by tax band - you can find out more on gov.uk.
FreeAgent handles all of this for you from 2016/17 onwards.
Tax on dividends before April 2016
All dividends issued up to and including the 2015/16 tax year were declared net of a notional tax credit of 10%. The amount that was actually paid out was the net figure, so in this example, the taxpayer would have received £500:
The voucher is important because the gross dividend and any tax credit need to go on your personal tax return. FreeAgent can help you start working out your personal tax and it will put this dividend on to the Self Assessment screen for you.