We would like to make you aware of new HMRC reporting rules that will affect many company directors and shareholders when completing their self assessment tax returns from the 2025/26 tax year onwards.
These changes are mainly aimed at individuals who are involved with “close companies” – broadly, private companies controlled by a small number of shareholders (for example, many family companies and personal service companies).
Who is likely to be affected?
You may be affected if any of the following apply to you:
you are a director of a small or family owned company;
you own shares in a private company, either in your own name or through another person or a trust;
you are recorded at Companies House as a “person with significant control” (PSC), which usually means you own or control more than 25% of the company’s shares or voting rights, or otherwise have significant influence over the company.
Most owner managed companies and personal service companies will be “close companies” for tax purposes. If you are unsure whether your company is a close company, or whether you are a PSC, please contact us and we can check this for you.
What has changed on the self assessment tax return?
From the 2025/26 tax year onwards, if you are a director of a close company, you will need to provide extra information about that company and your interest in it on your personal self assessment tax return.
This is in addition to the usual requirement to report your salary, benefits and dividends. The aim is to give HMRC clearer information about:
Which companies you are involved with;
How much of each company you own; and
How much dividend income you receive from each company.
What information will HMRC require?
For every close company of which you are a director, your self assessment tax return will need to show the following:
Company details
The company’s full name (as registered at Companies House);
The company registration number.
Your ownership
The percentage of the company’s share capital that you own or beneficially own. This can include shares held in your name and shares held on your behalf by someone else or via a trust.
Your dividends from that company
The total amount of dividends you received from that company during the tax year (6 April to 5 April).
In practice, there will be an “employment” entry for your role as director in that close company, even if you draw only a small salary or no salary at all, and a clear link to the dividends you receive from that company.
What does “percentage ownership” mean?
Your percentage ownership is generally based on the proportion of the company’s shares that you own.
This may include:
shares registered in your own name;
shares held for you by someone else (for example, a nominee);
shares held in a trust where you are the beneficial owner.
If you are a PSC because you control more than 25% of the shares or voting rights, that will usually guide the percentage you report.
If your shareholding changes during the year (for example, you buy or sell shares), HMRC’s detailed guidance may require us to look at your position at particular dates or over the year. For that reason, it is important to keep a note of any changes in your shareholding.
Why is HMRC asking for this information?
Dividends from your own company are a common way of taking profits, especially in owner managed and personal service companies.
By asking you to:
Link each dividend to a particular company; and
State your percentage shareholding in that company,
HMRC can more easily check that:
All dividends have been correctly reported on your tax return; and
The dividends paid are consistent with the shareholdings shown at Companies House and in the company’s accounts.
These changes also sit alongside wider proposals for close companies to report more information to HMRC about payments and other transfers of value to shareholders and directors..
What do you need to do now?
To help ensure your future self assessment returns are complete and accurate, we recommend that you:
Identify all relevant companies
Make a list of every company for which you are a director.
Note which of these are likely to be “close companies” (we can help you confirm this).
Gather key information for each such company
Company name.
Company registration number.
Your percentage shareholding (including any beneficial interests).
Keep good records during the tax year
Record every dividend you receive from each company – including the date and amount.
Keep details of any changes in your shareholding (for example, new shares issued to you, transfers to or from you, or share cancellations).
Provide this information to us when we prepare your return
When we request your year end information, please supply the above details for every close company of which you are a director or significant shareholder.
This will allow us to complete all relevant sections of your self assessment return correctly and help to minimise the risk of HMRC queries or delays.
Does this change how much tax I pay?
In many cases, these new rules will not change the amount of tax you pay. They mainly affect what must be disclosed on your tax return, not the underlying tax rates or allowances.
However, incomplete or inaccurate information can lead to:
HMRC opening enquiries into your return;
Delays in processing your return or any tax repayment; and
Potential penalties if HMRC considers that you have not taken reasonable care.
Providing full and accurate information is your legal responsibility, and these new questions make it even more important that your company and dividend details are up to date and complete.
How we can help!
We appreciate that these changes add another layer of detail to the self assessment process. We are here to help you by:
confirming whether your company is a “close company” for tax purposes;
checking whether you are a PSC and what percentage ownership should be reported;
reviewing your dividend records and linking each dividend to the correct company; and
completing the new sections of your self assessment tax return on your behalf.
If you are a director or significant shareholder of a private company, please let us know when we next prepare your return, or contact us in advance if you would like to discuss how these rules apply to you.
If you need any tax advice in Milton Keynes give a call to the team at Holmes Accountancy on 01908 315716 or contact us here.
The tax tip is provided for general guidance only; further advice should be sought, for specific issues.
Share this post: