Can Different Shareholders Receive Different Dividends in a UK Company?

Yes, different shareholders can receive different dividend amounts in a UK limited company. However, the payments must follow the rights attached to their shares, the company’s articles of association and UK company law.

Directors cannot simply choose how much to pay each shareholder without considering the company’s share structure.

Dividends Based on the Number of Shares

When shareholders hold the same class of shares, dividends are normally calculated using the same amount per share.

For example, if a company declares a dividend of £100 per ordinary share:

• A shareholder with 60 shares receives £6,000.
• A shareholder with 30 shares receives £3,000.
• A shareholder with 10 shares receives £1,000.

The shareholders receive different total payments because they own different numbers of shares. However, each ordinary share receives the same £100 dividend.

What If Shareholders Own the Same Number of Shares?

Shareholders who own the same number of shares in the same class will normally receive equal dividends.

If two shareholders each own 50 ordinary shares with identical rights, the company generally cannot pay one shareholder a larger dividend while paying the other less.

Paying different amounts may be possible if:

• The shareholders own different classes of shares.
• The shares carry different dividend rights.
• One shareholder properly waives their dividend.
• The company changes its share structure before declaring the dividend.

Any arrangement must be legally valid and properly documented.

Using Different Classes of Shares

A UK company can create different classes of shares, with each class carrying its own rights.

These may include:

• Ordinary shares
• Preference shares
• Non-voting shares
• Deferred shares
• Redeemable shares
• Alphabet shares, such as A, B and C shares

The company’s articles of association and the terms under which the shares were issued should explain the dividend rights of each class. Dividends paid to a particular class must follow those rights. HMRC guidance confirms that dividends must be paid according to the rights established for that shareholding.

Can Alphabet Shares Receive Different Dividends?

Alphabet shares can allow a company to declare different dividends for different share classes.

For example, one person may hold A ordinary shares while another holds B ordinary shares. If the company’s articles permit separate dividends, the directors may be able to:

• Declare a dividend on the A shares only.
• Declare a different dividend on the B shares.
• Pay dividends to both classes at different rates.

Merely naming shares “A” and “B” does not automatically create flexible dividend rights. The relevant rights must be properly established in the company’s articles and share documentation.

Can a Company Pay a Dividend to Only One Shareholder?

A company may pay a dividend to only one shareholder where that shareholder owns a separate share class that allows it.

However, if several people hold identical ordinary shares, the company should generally pay the same dividend rate on every share in that class.

Paying one holder of ordinary shares while excluding another holder of identical shares could breach the shareholders’ rights and expose the company or its directors to a dispute.

Can a Shareholder Waive a Dividend?

A shareholder may waive their right to receive a dividend. This can allow the other shareholders to receive their normal entitlements without the waiving shareholder taking payment.

A dividend waiver should:

• Be voluntary.
• Be completed before the dividend becomes payable.
• Usually be documented through a formal deed.
• Apply to the relevant dividend or specified period.
• Leave the company with enough distributable profits to pay the remaining dividend entitlements.

Repeated waivers, particularly between spouses or family members, may attract tax scrutiny. Professional advice is recommended before using dividend waivers as part of a regular payment arrangement.

Can Directors Decide Who Receives More?

Directors can decide whether to declare an interim dividend, but they must follow the rights attached to the shares.

They cannot allocate company profits according to personal preference. For example, directors should not give one holder of ordinary shares a larger dividend merely because that shareholder:

• Works longer hours
• Generates more sales
• Is also a director
• Needs additional income
• Has a different personal tax position

Payment for work should normally be handled through salary, bonuses or another appropriate form of remuneration—not by altering dividends on identical shares.

The Company Must Have Available Profits

Different dividends can only be paid when the company has sufficient distributable profits.

Cash in the company’s account is not enough by itself. Directors must examine the relevant accounts and confirm that profits are legally available for distribution. A company must not distribute more than its available profits from the current and previous financial years. GOV.UK explains the profit and record-keeping requirements.

The company should also retain enough cash to meet Corporation Tax, VAT, payroll, supplier payments and other liabilities.

What Records Should the Company Keep?

When declaring dividends, the company should:

• Review its available distributable profits.
• Check the articles and rights attached to each share class.
• Record the directors’ decision in meeting minutes.
• Clearly state which share class receives the dividend.
• Prepare a dividend voucher for each recipient.
• Record the payments in the company’s accounts.

A dividend voucher should show the company name, payment date, shareholder receiving the dividend and amount paid.

Are Different Dividends Taxed Differently?

Each shareholder is responsible for the tax treatment of the dividend they receive. Their personal tax liability may differ depending on their total income, tax residence and individual circumstances.

Dividends are distributions of profit rather than deductible company expenses. The company cannot use dividend payments to reduce its Corporation Tax bill.

Final Thoughts

Different shareholders in a UK limited company can receive different dividend amounts when they own different numbers of shares or shares with different dividend rights.

Shareholders holding identical shares should normally receive the same dividend amount per share. If a company wants greater flexibility, it may need properly structured share classes, suitably drafted articles of association or a valid dividend waiver.

The share structure and documentation should be reviewed before—not after—the dividend is declared.

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