Dividends

A dividend is a payment made to shareholders by a company. Provident Financial normally pays its interim dividend during November of the current financial year and its final dividend in the following June.

Our dividends

When the company announces a proposed dividend, it also announces the record date and the ex-dividend date associated with the dividend. The dividend is paid to shareholders whose names are on the share register at the close of business on the record date. The ex-dividend date is two business days before the record date. On that day the shares will be listed as ex-dividend. This means that a buyer will not receive the dividend payable on those shares.

Tax on dividends

The following information is intended to provide general guidance to individuals who are tax resident in the UK. It does not constitute professional advice. Shareholders who are in any doubt as to their personal tax position should seek their own professional advice, as should shareholders who are not resident in the UK.

For UK resident individuals, the tax treatment of dividends depends on whether the dividends are received before or after 5 April 2016.

Dividends received on or before 5 April 2016

A UK tax resident individual shareholder who receives a dividend on or before 5 April 2016 will be subject to tax on the dividend as follows:

  • The cash dividend you receive (the amount paid into your bank account) is grossed up for a notional 10% tax credit so that you are taxed on a gross dividend of 10/9ths of the cash dividend you receive.
  • The gross dividend is then taxed as follows:
    • 10% for basic rate taxpayers
    • 32.5% for higher rate taxpayers
    • 37.5% for additional rate taxpayers
  • You can then deduct the notional 10% tax credit.
  • The overall result, after deducting the notional tax credit, is that you will have suffered an effective rate of tax on the cash dividend you receive of:
    • 0% for basic rate taxpayers
    • 25% for higher rate taxpayers
    • 30.56% for additional rate taxpayers

Dividends received on or after 6 April 2016

For dividends received on or after 6 April 2016, the notional tax credit is abolished.

Instead, a UK tax resident individual shareholder will be taxed on the total cash dividends you receive (the amount paid into your bank account) above the new £5,000 annual tax free dividend allowance at the following rates:

  • 7.5% for basic rate taxpayers
  • 32.5% for higher rate taxpayers
  • 38.1% for additional rate taxpayers

The dividend allowance means that you can receive up to £5,000 of dividends tax free no matter what other non-dividend income you have in the tax year.

Dividend policy

Our dividend policy, set at the time of the demerger of our international business, is to at least maintain a full-year dividend of 63.5p per share whilst moving to a target payout ratio of 80% of profit after tax (1.25 dividend cover) and then maintaining this profile as profits grow.

Share consolidation

On 16 July 2007, as part of the demerger of our international business, we effected a 1:2 share consolidation. This was undertaken in order to preserve the continuity of EPS trends, which would otherwise have become distorted following the demerger of our international businesses.

Therefore, if you held 2,000 shares prior to the consolidation, this would automatically be adjusted to 1,000 shares. There would be no effect on the value of your shareholding as a result of the consolidation.

Dividends can be paid direct into your UK bank or building society by completing a dividend mandate form. You can do this online using our electronic shareholder services.