I have just completed my first year trading as a limited company. I have been taking money out of the company throughout the year and now I want to declare a dividend.
I have got my profit figure and have deducted 20% for Corporation Tax so it is the net figure that I can declare the dividend from. Now is where the confusion lies with me.
I have set up a directors loan account and throughout the year have been putting money in and taking money out and also have posted things such as Use of home office etc and my mobile phone, internet etc. The credit entries have all gone to my DLA.
How do I calculate what dividend to take/post as my DLA is less than my profit figure?
Do I just clear the amount from my DLA apart from my share of £1.00?
Hope I haven't made myself look to stupid?
It my first year and have never been involved in this kind of thing before.
I assume you know that you cant go back and pre date dividends. So for instance if the year end is 31 December 2014 or before and your DLA is a Debit balance you have a problem.
That is the technical answer but of course in reality most people dont know what their post tax profits are until long after their year end when the accounts are done by the accountant.
Whatever your DLA debit balance is in the year declare at least that amount to clear the DLA overdrawn balance. Assume your DLA is in Debit at the moment and if is less than post tax profits then you dont have a problem. eg say DLA is in Debit by £10k and post tax profits is £15k declare a dividend of £10k to clear out DLA and reduce the post tax reserves to £5k.
