Add Tax on Dividends

Add back dividends icon

Dividends are payments of profit to shareholders. In fact, there is a limit to the amount of dividends that can be paid which is called the reserves. Simplistically, reserves is the cumulative profits held back within the company (from this year and previous years).

As a result, dividends have to come towards the end of the accounts, specifically after the “profit after tax” line. This removes these from the corporation tax calculation.

If you have considered dividends to be an expense or cost then unfortunately they are not as far as the corporation tax calculation is concerned. We could have included them on the section on “reducing expense bill”. We separated them out as they are very common and could get overlooked in the confusion over expense.

So, at the risk of repetition, remove dividends paid as they are not relevant to the corporation tax calculation.