Can I pay this dividend? Reserves check

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When can a limited company pay a dividend?

Section 830 of the Companies Act 2006 says a company may distribute only accumulated realised profits not previously used, less accumulated realised losses not already written off. In plain words, the company needs enough distributable reserves when the directors decide the dividend; bank cash and current sales alone are not sufficient (section 830).

How do I calculate distributable reserves?

Add retained profits brought forward to this period’s realised profit after tax, then subtract dividends already paid or declared. The worked example gives £25,000.00 before the proposal. A £20,000.00 dividend fits and leaves £5,000.00, subject to the figures being supported by relevant accounts.

Which accounts support a dividend decision?

The directors need relevant accounts that allow a reasonable judgement of the company’s profits, losses, assets, liabilities and provisions. Annual accounts may support the decision; if later trading changed the position, suitable interim accounts may be needed. Section 836 sets the statutory framework, and public companies have additional requirements (section 836).

Can a company pay a dividend after making a loss?

Possibly. A current loss does not automatically prevent a dividend if sufficient accumulated realised profits remain after that loss and previous distributions. Conversely, a current profit is not enough when accumulated losses still exceed it. Use the retained earnings history and up-to-date after-tax result, and exclude reserves that are not distributable.

What should directors do if there is a dividend shortfall?

Do not declare or pay the proposed amount from capital. Reduce the dividend to an amount supported by distributable profits, or wait until further realised after-tax profits exist and suitable accounts show them. If a dividend has already been paid without sufficient reserves, its legal and tax treatment depends on the facts and needs specific advice.

See the director’s loan tax calculator if money was withdrawn as a loan, or estimate Corporation Tax before using current profit.

This checker provides general information, not tax advice.

Which rules does this calculator follow?

Every figure comes from the rules HMRC and Companies House publish on GOV.UK, and from the legislation behind them. The links below go to the pages we checked when we last reviewed this calculator, so you can read each rule in full and check that it applies to your company.

• Companies Act 2006, section 830: distributions only from profits available
• Companies Act 2006, section 836: relevant accounts

Frequently asked questions

What are distributable reserves?

They are accumulated realised profits available for distribution after subtracting accumulated realised losses and amounts already used by dividends or capitalisation. Not every reserve shown in company accounts is distributable. The directors must use relevant accounts and consider the company’s up-to-date position when deciding whether a dividend can lawfully be paid.

Can I pay a dividend if the company has cash?

Cash in the bank does not prove that a dividend is available. The cash could come from a loan, share capital, unpaid creditors or taxes due. A company needs sufficient distributable profits supported by relevant accounts, as well as enough cash to make the payment without harming its ability to meet liabilities.

Can current-year profits support an interim dividend?

Yes, realised current-year profit after tax can support an interim dividend when suitable interim accounts allow the directors to make a reasonable judgement of the amount available. The calculation should include accumulated losses, earlier dividends, tax and necessary provisions. Management figures that ignore those items can overstate distributable profits.

Do retained losses stop all dividends?

They stop dividends until sufficient accumulated realised profits have absorbed them. For example, a £10,000 loss brought forward and £15,000 current realised profit after tax may leave £5,000 before earlier dividends. The company cannot simply disregard past losses because the current period or bank balance looks positive.

What happens if a dividend exceeds available profits?

A distribution made without sufficient profits can be unlawful. A shareholder who knew, or had reasonable grounds to believe, that it contravened the Companies Act may have to repay it. The accounting, director-duty and tax consequences depend on the circumstances, so an already-paid shortfall needs specific professional advice.

What paperwork should the company keep for a dividend?

Keep the annual or interim accounts supporting the decision, board minutes recording the directors’ consideration and approval, and a dividend voucher for each shareholder. The records should show the amount, date, recipients and share entitlement. Continue to consider solvency and liabilities even where the reserves calculation is positive.

Related free tools

• Corporation Tax calculator: Estimates the Corporation Tax a UK limited company pays on its taxable profits for one accounting period of up to 12 months. Applies the small profits rate, the main rate and marginal relief, with associated companies, short periods and periods that straddle 1 April. A close investment-holding company pays the main rate on all its profits. Returns the tax, the effective rate and the payment and filing dates.
• Corporation Tax deadline calculator: Works out a UK private limited company's Corporation Tax payment date, CT600 filing deadline and Companies House accounts deadline from its accounting period. Accounts longer than 12 months are split into two Corporation Tax periods, each with its own payment date.
• Corporation Tax late filing penalty and interest calculator: Works out HMRC's penalties for filing a UK company's Company Tax Return (CT600) late — the flat £200/£400 penalties for filing deadlines from 1 April 2026 (£100/£200 before then), and the 10% or 20% tax-geared penalty — plus late payment interest on the Corporation Tax at HMRC's published rates.
• All free Corporation Tax tools

Last reviewed 14 October 2026. This calculator gives general guidance, not tax advice.