What does "dormant" actually mean?
There are two versions of the word, and they do not match.
Companies House calls your company dormant when nothing significant has happened in its money records for the financial year. Their test is simple: if a payment or receipt is the kind of thing your company has to write down in its books, it counts, and dormancy is gone. A few small items are let off, like certain filing fees you pay Companies House and a late-filing penalty, plus the money paid for the shares when you set the company up.
HMRC uses a different test for Corporation Tax. There, dormant means your company has stopped trading and has no money coming in. Buying, selling, renting out property, advertising, employing anyone, or earning bank interest all count as being active.
So your company can be dormant for one of them and not the other. Our guide on what a dormant company files covers who you send what to.
So can my dormant company pay a dividend?
It can, as long as there is profit sitting in the company to pay it from. Nothing bans a quiet company from handing its leftover profit to its shareholders.
What you cannot do is pay one and still call that year dormant. A dividend is money leaving the company and your books have to show it, which is the whole of the Companies House test. The year it happens becomes a normal year.
Is there any profit to pay out?
This is the part that stops people, and it has nothing to do with dormancy.
A dividend can only come out of profit your company has left over: profit from this year and earlier years, after Corporation Tax, less any losses, that has not already been paid out. Accountants call that your reserves. If that figure is £0 or below, your company cannot pay a dividend at all, dormant or trading.
Money in the bank is not the same as profit left over. Cash sitting in the account might be a loan you put in, or money owed to someone else. If you take it out as a "dividend" when there is no profit behind it, it is not really a dividend, and it usually turns into a loan from the company to you, which brings its own tax bill. See director's loans for what that costs.
What changes at Companies House if I pay one?
For that one financial year:
- Your company is no longer dormant.
- You file a normal set of accounts for the year, usually the short micro-entity kind, instead of the dormant version.
- The following year, if nothing else happens, your company can be dormant again.
Paying a dividend does not close your company, fine it, or put it on any list. It changes which set of accounts that one year needs.
Does it change anything for HMRC?
Paying a dividend is money going out, not income coming in, and it is not trading. On its own it does not make your company active for Corporation Tax.
Be careful with what sits alongside it, though. If your company holds cash in an account that pays bank interest, that interest is income, and income is what HMRC's test cares about. Plenty of quiet companies get caught by a few pounds of interest rather than by the dividend. Tell us what has been in and out of the account and we will tell you which side of the line you are on.
What does this look like in pounds?
Priya stopped trading in 2024. Her company's financial year ends on 31 March. It has £8,000 in the bank, all of it profit from the trading years with the Corporation Tax already paid, and it owes nobody anything. She has filed dormant accounts since. In June 2026 she pays herself a £3,000 dividend, which falls in the year running from 1 April 2026 to 31 March 2027.
| Profit left over before the dividend | £8,000 |
| Dividend paid | £3,000 |
| Profit left over after | £5,000 |
| Corporation Tax the company pays on the £3,000 | £0 |
| Accounts for the year to 31 March 2027 | Normal accounts, not dormant ones |
The £3,000 was allowed, because £8,000 of leftover profit covers it. The company owes no more Corporation Tax on it, since tax was already paid when the profit was earned. The year to 31 March 2027 is a normal year at Companies House. The year after that can go back to dormant.
Swap one detail and the answer changes. If that £8,000 in the bank were money Priya had lent the company, her leftover profit would be £0, and the £3,000 could not be a dividend at all.
How SimpleReturns handles it
Tell us what the company took in and paid out for the year and we work out your leftover profit, whether the dividend was covered, and which set of accounts that year needs. You see every figure before anything is sent.