What are dividend payments?
A dividend is a payment made by a limited company to its shareholders. These payments were initially conceived as a way of divvying up profits among shareholders in the company; a proportion of the profits would be retained for future investment, while the rest would be divided up amongst investors. Most small business owners are also the major or sole shareholder in their company. This means that you can make dividend payments to yourself – and there are good tax-planning reasons for doing so.
