I advise contractors that a Dividend Declaration Form/voucher should he held on your records to cover all dividends paid out by your company.
This is really important in case you are investigated by HMRC: the absence of this documentation may well encourage a Tax Inspector to class the receipts not covered by the forms as salary and then put in a claim for unpaid PAYE/NI.
Please bear in mind that dividends are returns on investment (ie on the shares you hold in the company); they are not salary/employment income.
Dividends should be paid by your company in proportion to the shareholding (ie number of shares each person owns), of course. Dividends can be taken as often as you like, funds permitting, after completing the declaration form. It is unlawful to take dividends from the company when there are insufficient funds to cover the company’s liabilities as dividends should only be paid from company profits.
I advise that payments of dividends and salary from your company into your private bank account should always be kept separate, so that if a HMRC investigation does take place it is clear what each payment from your company is.
Article from Graeme Bennett of Forbes Young.
Shameless shout out to Crunch, whose online accounting system generates such vouchers automatically, every time you pay your employees a dividend.
Regarding separation of bank payments… best practice is to give the payments a really obvious payment reference, e.g. “SALARY” and “DIVIDEND”. This has a secondary benefit in that it makes it clear to the bank holding your personal current account what the source of the money is, as large infrequent transfers can occasionally trigger their fraud alerts.