Home / Questions / Does a Limited Company Pay Tax on Dividends?
Last updated 23 October 2026. Written by the Limited Company Accountant UK team, part of Accotax. Figures are for the 2026/27 tax year; always check GOV.UK for the latest rates.
Short answer: A company does not deduct tax from dividends it pays, and dividends are not an allowable expense, so they come from profits after Corporation Tax. The shareholder pays dividend tax personally above the £500 dividend allowance.
At a glance
| Company deducts tax? | No |
|---|---|
| Allowable expense? | No, paid from post-tax profit |
| Personal dividend allowance | £500 |
| Paid through | Self Assessment |
Who reports dividends?
Directors and shareholders report dividend income on their Self Assessment return unless it falls inside their tax-free allowances.
Dividend paperwork
Each dividend needs board minutes and a dividend voucher showing the amount, date and shareholder.
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The bottom line
A company does not deduct tax from dividends it pays, and dividends are not an allowable expense, so they come from profits after Corporation Tax. If you would rather not do it alone, our fixed fees start at £45.83 + VAT a month.
Frequently asked questions
Can I pay a dividend whenever I want?
Only from distributable profits. Paying one without enough profits can make it an overdrawn director’s loan.
Are dividends subject to National Insurance?
No.
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Our packages start at £45.83 + VAT and cover accounts, tax and deadlines. Get a free quote or call 0203 4411 258.
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