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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi, What is the difference between Dividends and Net Profit,

Resolved Question:

Hi, What is the difference between Dividends and Net Profit, and is it better to reduce the dividends to give a better picture about the profit? thanks
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Dividends are distribution of profits after tax and a non declaration of dividend does not improve the net profit.

If you wished to have a healthy balance sheet with good reserves (retained profits) than by reducing dividends you would improve the profit/reserves position.

I hope this is helpful.

Customer: replied 2 years ago.

Thanks for reply. Sorry I'm naieve on these terms. I am running my own business with my wife as a secretary, so we are just 2 in the ltd company.


I transferred some amounts of money into a personal saving account to save for a deposit for a new house.


I am applying for a mortgage, my accountant has recorded all the withdrawal I made as dividends.


I am wondering if I can change the dividends and record them as net profit, to increase the chance of getting a mortgage.


Thanks

Expert:  taxadvisor.uk replied 2 years ago.

Samer, thank you for your reply.

To be honest, your net profit would be greater than the dividends if the dividends are out of the same profit because net profit is before and provision for corporation tax and dividends payable/paid.

Mortgage lenders normally look at net profits from the company accounts to assess lending when the person is running own company.

I hope this is helpful.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4798
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Good luck.

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