If you are a company director, then you have a legal duty to protect the company’s assets and to carefully consider whether you have sufficient funds to pay its liabilities (for example, upcoming VAT and corporation tax payments) before a dividend can be paid.
You should also consider:
Do I have sufficient retained profits to pay a dividend?
“A dividend or distribution to shareholders may only be made out of profits available for the purpose.”
Therefore, dividends can only be paid out of prior period retained profits +current period’s retained profits (after providing for corporation tax and current dividends already paid in the current year).
What paperwork should I need to keep when I pay a dividend?
Even a sole director, you should keep minutes from meetings where you confirm the amount of dividends taken.
Also shareholders should receive a tax voucher -as a receipt for tax purposes. It should show the dividend rate per share and dividend figure.