A complete guide to dividend vouchers UK

Today we are going to celebrate one of the unsung heroes of the accounting world – the dividend voucher. These seemingly unassuming documents play a vital role in the intricate realm of corporate finance and are not to be underestimated!

In this blog post, we’ll delve right in and demystify dividend vouchers, explaining their purpose, contents, preparation process, and legal implications – giving them the attention they rightly deserve.

What are dividends?

You may have heard the expression “pay dividends,” meaning that something you do will cause good results at a time in the future. But have you ever wondered where that phrase comes from?

If you’re a shareholder in a company, one of the best benefits is to receive a portion of the profits, which is exactly what dividends are all about. 

When a company thrives and rakes in earnings, it can choose to share the rewards with its shareholders. The decision to distribute dividends and the amount given is determined by the company’s board of directors, who take into account factors such as how well the company is doing financially and what exciting plans they have for the future. 

Dividends are often announced per share, meaning shareholders get a specific sum for each share owned. Some companies pay dividends regularly, whether monthly, quarterly, semi-annually, or annually. However, not all companies opt for dividends, with some preferring to reinvest profits in the hope that the investment will grow.

What are dividend vouchers?

Dividend vouchers validate the moment a company shares its hard-earned profits with its shareholders. They play an important role in documenting the distribution of company profits to shareholders and serve as official records, providing transparency and proof of income received. These vouchers are essential for maintaining accurate financial records and protecting shareholder rights.

What needs to go on a dividend voucher?

The content of dividend vouchers is straightforward, but it is vital to include:

  1. Company Information:

The dividend voucher should prominently display the name, registered address, and company number of the distributing company. This data serves two purposes: it allows shareholders to confirm the authenticity of the payment and helps in identifying the individuals involved.

  1. Shareholder Details

The voucher must feature the recipient shareholder’s name, address, and shareholder reference number (if applicable). These ensure that the payment is accurately attributed to the right person.

  1. Dividend Payment Details

The voucher should clearly state the amount of the dividend payment and the currency used. It’s also important to mention the date when the dividend was either paid out or announced. This helps the recipient to see how much they’ll be receiving and when. 

  1. Company Director’s Signature:

For a dividend voucher to be valid, it needs the signature of a director from the distributing company. 

Example of a dividend voucher

The example below illustrates the format and content of a dividend voucher. 

Company Name: ABC Ltd.
Registered Address: 123 High Street, Oxford  OX1 1HS
Company Number: 123456789

Shareholder Name: John Doe
Address: 1 New Road, Swindon SN1 9NR
Shareholder Reference Number: SH987654321

Dividend Payment Details:
Amount: £500
Currency: British Pound Sterling (£)
Payment Date: 1st June 2023

Director’s Signature:
J. Deer
Jane Deer
Managing Director, ABC Ltd.

How will I receive a dividend voucher? 

Traditionally, dividend vouchers were sent to shareholders by post. However, many companies now offer digital alternatives and shareholders may receive their dividend vouchers through email or via an online shareholder portal. This allows shareholders to access their vouchers quickly and securely without relying on traditional mail services. Plus, it’s more environmentally friendly! 

If you’re a shareholder, it’s important to know which communication methods are being used by the company you have invested in and to keep your details updated. Otherwise, you won’t receive notifications of any payouts.

Who prepares dividend vouchers?

Typically, dividend vouchers are prepared by the company’s accountant, who will record the dividend payments and make sure that everything is accurate and compliant. 

Are dividend vouchers a legal requirement?

Although dividend vouchers are not required by law in the UK, they are highly recommended. By providing a formal record of dividend payments, these vouchers play an important role in financial transparency and fulfil the company’s legal obligation to keep accurate records.

Additionally, dividend vouchers serve as physical proof of income for shareholders, protecting their rights as valued stakeholders in the company.

What are the tax implications of dividend vouchers? 

Like most good things in life, dividends come with tax implications. The UK offers a tax-free dividend allowance, and after this, dividend tax is payable. The tax rate on dividends varies based on your total income and tax bracket – something a good accountant (such as ourselves!) can help you to calculate.

Shareholders must receive dividend vouchers from companies when dividends are declared. If a company fails to provide these vouchers, HMRC can consider the payments as salary, resulting in tax and national insurance obligations. That’s why it is in both the company’s and shareholders’ best interests for these documents to be produced and properly recorded. 

Do I need dividend vouchers for a dividend reinvestment plan? 

Dividend Reinvestment Plans (DRIPs) are important for shareholders who want to reinvest their dividend income in the company. By providing dividend vouchers, individuals who participate in DRIPs can grow their ownership stake effectively over time by using their dividends to purchase more shares.

Are there different regulations for dividend vouchers outside the UK? 

Dividend vouchers may have different rules and regulations depending on the country. Companies that operate internationally must make sure they understand and follow the specific requirements in each country where their shareholders live. This ensures compliance with the applicable regulations and keeps things running smoothly across borders.

If you would like any advice on dividend vouchers, or help with calculating your tax rate on dividends, you can count on CRM. Fill out our contact form or call us on 01865 379272.


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