The UK tax system is changing the way directors of close companies report dividend income and shareholdings on their Self Assessment tax returns. These changes apply from the 2025/26 tax year (6 April 2025 to 5 April 2026), with the first affected tax returns filed after April 2026.
This blog explains who is affected, what information must be reported, the deadlines and penalties, and practical steps you can take now to prepare.
- Who This Affects — Close Company Directors and Shareholders
These new reporting requirements apply to individuals who are:
- Directors of a close company, and
- Also shareholders in that company.
A close company for tax purposes is generally a company controlled by five or fewer shareholders or directors. This typically includes many owner-managed businesses and small limited companies.
These rules do not apply to dividend income from sources such as:
- Listed shares,
- Unit trusts or funds,
- Other companies in which you are not a controlling shareholder.
The change focuses specifically on dividends received from companies you control.
- What You Must Report on Your Self Assessment
From 6 April 2025, you will need to disclose four key items on your tax return:
- Close company name — the name of the company from which you received dividends as a director/shareholder.
- Company registration number — the official Companies House number.
- Dividend income received from that closed company during the tax year.
- Maximum shareholding percentage held during the tax year.
Dividend Income Disclosure
You must report the value of dividends received from each closed company separately — even if the amount is zero. This is distinct from dividends from other sources. HMRC requires separate entries so it can link dividend receipts to specific company records.
Shareholding Percentage Disclosure
You must report the highest shareholding percentage you held at any time during the tax year. This includes situations where shareholdings change mid-year due to transfers, buybacks, or new share issues. The maximum percentage held at any point is the figure that must be disclosed.
This requirement applies even if you no longer hold those shares at year-end.
- Deadlines, Penalties and Reporting Timetable
When the New Rules Apply
These requirements apply to the 2025/26 tax year onwards. The first returns requiring this information will be filed after April 2026.
Penalties for Non-Disclosure
HMRC has confirmed that additional penalties will apply if the required dividend disclosure information is omitted from a Self Assessment return. The penalty for each failure to comply with this information is £60. Directors should ensure that all required fields are accurately completed.
Practical Reporting Deadlines
- Prepare and maintain records during the tax year (6 April 2025–5 April 2026).
- Include the new dividend disclosures when filing your Self Assessment return for 2025/26 (filed after April 2026).
- If you are not normally required to file a Self Assessment but decide to because of dividend income, you still need to report within the usual reporting window for the tax year.
- Practical Steps to Prepare Now
The earlier you organise your reporting approach, the smoother your 2026 return will be. Recommended actions include:
a) Compile Close Company Details
Prepare a list of all close companies where you are both a director and a shareholder, including the company name and registration number.
b) Track Dividend Income Throughout the Year
Record all dividends received from those companies during the tax year. Ensure you maintain accurate dividend vouchers or equivalent documentation.
c) Monitor Shareholdings
Keep records of shareholdings and any changes during the tax year. For each company, note the highest percentage of shares you held at any point.
d) Document Changes with Supporting Evidence
If shareholdings change mid-year, keep supporting documentation such as:
- Share transfer forms,
- Updated share certificates,
- Board minutes or resolutions.
Accurate documentation helps ensure the maximum shareholding percentage you report aligns with HMRC expectations.
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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