As a company owner manager, new rules will require you to report more information about your company and the income you derive from it on your self-assessment tax return. What’s the full story?
HMRC has ramped up its unrelenting attack on small companies and their owners with a new requirement to report income. Until now, self-assessment tax returns required a single total figure for all dividend income received in the tax year. This is set to change for 2025/26.
First new reporting requirement
If you receive dividends from a close company (broadly one that’s owned or controlled by five or fewer individuals) in your tax return for 2025/26, you must indicate whether you were a director of it at any point in the tax year and provide the company’s full name and registration number.
Currently, providing this information has been optional.
Trap. The dividends received by you from each close company of which you are a director must be separately disclosed even if the figure is zero.
Tip. The new requirement includes any dividends set off against your director’s loan account with the company, i.e. not just those received into your bank account.
Second new reporting requirement
The last disclosure requires details of the director’s highest percentage of share capital held in the year.
While this will prove very easy for static holdings in companies with just one class of shares, it could prove more challenging where either alphabet shares are involved or class rights/shareholdings have changed during the tax year.
Does it apply to you?
For the purpose of the new reporting rule, directors are not limited to those registered at Companies House. You’re also included if you’re a shadow director or you control more than 20% of the company’s ordinary share capital, taking into account the shares owned by your associates.
Tip. The two exceptions to the new reporting rules are dividends from quoted companies and companies in a corporate group which is not a close company group.
Record keeping
In order to comply with all of the above, from 6 April 2025, directors of close companies must ensure they are keeping detailed records of:
- dividends declared and paid
- changes to the company’s shareholdings; and
- the rights attaching to every class of issued shares.
Tip. The submissions to Companies House are a useful source of this information.
Penalties
Failure to make these disclosures accurately will land you in hot water, as HMRC can charge per £60 penalty for each error.
Tip. If you’re a director shareholder of multiple companies, keep a contemporaneous record of which company pays you dividends. This will make it easier to comply with the new reporting rules.
For 2025/26 and later tax years, if you’re a director of a close company that pays you dividends, you must declare them separately on your self-assessment returns instead of just a total amount. You’ll also need to report what percentage of the company you own. Keep contemporaneous records of dividends you receive to make reporting easier.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.