If you’re a company director or shareholder, there are big changes coming that will reshape how you report income and dividends on your Self Assessment tax return. HMRC is tightening disclosure rules from April 2025, and the first affected returns will be filed in April 2026. These new requirements are designed to increase transparency and make it harder for taxpayers to under-report dividend income, and yes, there are new penalties for getting it wrong.
What’s Actually Changing?
From the 2025/26 tax year, directors and shareholders of close companies (that is, companies controlled by five or fewer shareholders) will need to provide much more detailed information on their tax returns.
The changes affect those who are both company directors and shareholders, even if you own a small percentage of shares.
You’ll need to disclose:
- The name and company registration number of every close company you’re involved with
- The exact dividend amount received from each company
- Your maximum shareholding percentage held at any point during the tax year
- A breakdown of all dividend income rather than a single combined figure
Previously, many directors could “bundle” dividend income together. From 2025/26, that’s no longer permitted, each company must be listed separately.
The Maximum Shareholding Rule
Even if your ownership changes during the year, HMRC wants the highest shareholding percentage you held at any time between 6 April and 5 April. So if you owned 60% for two months before reducing it to 30%, you must still report 60%. This stops directors from briefly selling shares to reduce their apparent control or avoid disclosure.
Why Is HMRC Making These Changes?
HMRC’s motivation is simple: accuracy and transparency. In recent years, the tax authority has struggled to verify dividend income accurately due to limited disclosure requirements. The new data rules close these gaps and align with HMRC’s wider digital compliance strategy (including Making Tax Digital).
By collecting more granular information, HMRC can:
- Cross-check dividends against company accounts
- Identify potential tax avoidance schemes
- Improve data quality for compliance and enforcement
- Reduce errors in Self Assessment filings
This is backed by advanced data-matching technology that links information from Companies House, corporation tax returns, and bank reporting. In short, HMRC will have a clearer view of every director’s income structure.
The New £60 Penalty – and How It Works
Non-compliance will carry a fixed penalty of £60 per omission. That means if you fail to include your company’s registration number, dividend figure, or shareholding percentage, each missing item could cost you £60, and that’s per company.
For example, if you forget to report four required details for one company, that’s potentially £240 in penalties. Multiply that across multiple companies, and the cost adds up quickly.
HMRC has made it clear these penalties apply from the 2025/26 tax year onward, with enforcement beginning once you file your return in April 2026.
The Impact on Record-Keeping
The expanded reporting means directors must keep far more detailed and timely records. You’ll need to track:
- Dividend payments (with dates and amounts)
- Company details and registration numbers
- Changes in shareholding, with dates and reasons
- Any benefits, loans, or other payments from companies you control
It’s not enough to rely on year-end paperwork. You’ll need accurate, ongoing bookkeeping to complete the new Self Assessment forms correctly, particularly as the Employment (SA102) section is being updated to capture these disclosures.
Practical Steps: How to Prepare Now
The tax year 2025/26 may feel distant, but the data HMRC expects will come from that period. Preparation should start well before April 2025. Here’s how to get ready:
- Review your records – Ensure your dividend and shareholding data is complete and consistent across all companies.
- Update your bookkeeping – Adopt a digital system that tracks dividends and shareholdings automatically.
- Coordinate with your accountant – They’ll need this data for your 2026 return; start sharing it now.
- Avoid “end-of-year panic” – Monthly or quarterly record reviews will save time and reduce the risk of missing information.
For many small business owners, this shift may feel like part of the broader Making Tax Digital journey, where real-time financial data and digital reporting become the new standard.
The Bigger Picture
HMRC’s new director and shareholder reporting rules aren’t just an extra layer of admin. They represent a wider move towards greater transparency and accountability in small business taxation.
By tightening dividend disclosure, HMRC hopes to reduce tax avoidance and improve compliance accuracy. For directors, it’s a signal to professionalise financial processes and stay proactive.
Those who start preparing now, by improving record-keeping and engaging with their accountants, will be in a strong position when the first returns are due in 2026. Those who delay may face both penalties and additional scrutiny.
The Bottom Line
From April 2025, directors and shareholders in close companies must provide detailed company, dividend, and shareholding disclosures on their Self Assessment tax returns.
Missing information will trigger £60 fixed penalties per omission, and incomplete records could lead to broader HMRC investigations.
Get ahead of the curve: review your dividend records, keep accurate data throughout the year, and make sure your accountant has everything they need well before April 2026.
This isn’t just about avoiding fines, it’s about building better financial discipline for the future.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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