Overpaid dividends

Accounting
1

I’ve mistakenly overpaid myself dividends in 2022 that exceed the profit for the previous year in question (2021).

I’m about to repay the excess amount but now I need to correct the books to match what should have been paid.

what is the correct way to approach this?

I’m thinking along the lines of:
delete the dividend vouchers
retag amounts as loans
check PnL more carefully in future

Does this sound correct, or is there something more that I need to factor in?

2

Hello @fudgednumbers

I couldn’t not commend unfortunately, I would recommend speaking to your accountant specific tailored advice on this as the support team are not registered accountants nor bookkeepers.

Sorry we could not help on this occasion but I will leave this thread open as there are some accountants on here who may add a comment.

3

Hi,

Yes this is something that you definitely need to talk to an accountant about, as loans (where you owe the company money) also potentially have tax and NI consequences. They should also be able to advise what to do with the dividends already declared.

James, Beach Accountancy

1 Like
4

You need to look at reserves, ie accumulated profits, when deciding how much you can pay as dividends, not just the profit for the year. Your accountant should advise you on the best course of action when preparing your accounts and tax return so you definitely need to talk to them before doing anything else. As James says, there are potentially tax consequences for you personally.

5

Thanks everyone.

Yes, quite correct about capital reserves; in this instance it was our first full year so there were no previous capital reserves accumulated to account for.

Our accountant has said that I should just pay it back and adjust the previous payments to the directors loan account, which I’ve done, and seems like everything adds up correctly now.

Dividends were paid in euro’s which is where I went wrong with my calculations on what had been paid or could be paid.

Appreciate the input from all!

6

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