Glossary

Distributable reserves

Distributable reserves are the accumulated realised profits a company is legally allowed to pay out as dividends — the hard ceiling on what you can extract as an owner.

2 min read

Realised profitWhat can lawfully be paid out

The dividend capNo reserves, no dividend

Definition

Distributable reserves are a company's accumulated, realised profits less accumulated realised losses — the pool from which dividends may lawfully be paid under the Companies Act 2006.

In plain terms

They're the only money you can legally take as a dividend. Profit sitting in reserves from good years counts; unrealised gains and share premium generally don't.

Why it matters for your company

Declaring a dividend beyond distributable reserves is an unlawful distribution — the amount may have to be repaid, and it often lands as an overdrawn director's loan account. Check reserves before you draw. See company reserves.