A shareholder is someone who, quite literally, holds shares in a limited company. Shares are basically units of ownership, so if you hold all of the shares, it means you own 100% of the company.
What does a shareholder do?
Shareholders don’t necessarily need to be involved in the daily management of a company, but they might influence it in other ways. Depending on the type of shares they own, a shareholder may have voting rights allowing them to have a say on any major decisions about the company, such as:
- Changing the company structure or name
- Setting director’s salaries
- Authorising the creation or transfer of company shares
The extent of their decision-making power depends on how many shares they own. For example, if a company is owned by two shareholders, one of whom owns 75% of the shares, they have more voting power than the other shareholder.
Are shareholders different to directors?
Yes, because in very basic terms, shareholders own the company and directors run it. They have different roles and responsibilities, but a shareholder and director can also be the same person! It’s particularly common in smaller businesses.
Who can own shares in a company?
A shareholder can be an individual, or even another entity such as a limited company, partnership, or organisation. Individuals must verify their identity at Companies House.
How do I become a shareholder?
It depends! You might be a shareholder because you incorporated your own limited company, but this isn’t the only way. For example, you might:
- Buy shares
- Provide funding, investment, or expertise and receive shares in exchange
- Have shares gifted to you
- Inherit them
- Acquire them through a workplace share scheme
The benefits of being a company shareholder
Being a shareholder usually means you’re entitled to make decisions about the company, and to receive a share of the company’s profits known as a dividend payment. The dividend payment you receive is worked out based on the volume and type of shares you own.
Dividends are taxed at a lower rate than Income Tax and you won’t need to make National Insurance contributions on them, so they can be quite a tax-efficient way to receive income!
Do shareholders pay tax?
Yes, dividends are a source of income so shareholders pay tax on any they receive if the total amount is more than the £500 Dividend Allowance during the 2026/27 tax year.
| Dividend Tax Rate & Threshold | ||
| Tax Band Name | 2025/26 | 2026/27 |
| Personal Allowance | £0 - £12,570 0% | £0 - £12,570 0% |
| Basic rate | £12,571 - £50,270 8.75% | £12,571 - £50,270 10.75% |
| Higher rate | £50,271 - £125,140 33.75% | £50,271 - £125,140 35.75% |
| Additional rate | £125,140 upwards 39.35% | £125,140 upwards 39.35% |
They’re not taxed at source like money from an employer usually is, so you’ll need to submit a Self Assessment tax return to report what you receive to HMRC, and pay any Dividend Tax you owe.
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