What are dividends?
When you are a shareholder of a company, you may receive money for the shares you own in a form of dividend. A dividend is a payment from the company to its shareholders made out of profits after corporation tax and VAT.
Receiving payment in dividends can be an effective way to draw money from your company as they do not attract any National Insurance contributions. Dividends are distributed accordingly to percentage of the company owned (shares held) by each shareholder.
When company is owned by two shareholders, each owning 5 shares (50% of the company), with a dividend amount of £100 per share, each will receive total dividend of £500 (5 shares x £100).