Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Scrip dividend definition

What does Scrip dividend mean? A scrip dividend is where a company offers shareholders fully paid new shares instead of, or as an alternative to, a cash dividend. It is a descriptive term, not defined in statute or case law, and its use is consistent across England & Wales, Scotland, Northern Ireland and Ireland. Key features include: shareholder election; pro rata issue using a stated scrip price/ratio; cash to non-electing holders; and potential dilution. Companies use scrip dividends to preserve cash and manage capital. Implementation typically requires directors’ authority to allot and, where structured as a capitalisation, power to capitalise reserves; consistency with the articles; board...

UK tax treatment of scrip and stock dividends: income tax and corporation tax, distributions, CGT, VAT and stamp taxes, non-UK issuers, fractional entitlements and bonus issues

Published by a LexisNexis Tax expert

Practice notes

What is a Scrip dividend and why do companies make them?

A scrip dividend—also known as a scrip or stock issue, a share dividend, or a scrip alternative—arises when a company gives its shareholders the choice to choose between receiving either:

a cash dividend; or
new Shares (usually) of a value broadly equivalent to the cash dividend

Such distributions are more prevalent in challenging economic conditions, when companies ordinarily seek to lessen the amount of any cash dividend they need to pay out.

Shareholders may often favour the scrip option because it enables them to obtain new shares without having to pay:

broker’s Fees; or
stamp taxes

In addition, certain companies put forward ‘enhanced scrip dividends’ to encourage take-up by shareholders. Under an enhanced scrip dividend, the value of the shares issued exceeds the value of the corresponding cash dividend. There are particular tax Rules that apply to scrip dividends, and these are described in this Practice Note...

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Web page updated on 22/05/2026

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