More detail, more risk: what close company directors need to report from 2025/26

If you run your own limited company, your Self-Assessment Tax Return is about to get a little longer and more complicated. But that’s no reason to panic!

From the 2025/26 tax year onwards, directors of close companies need to disclose much more information about their shareholdings and dividends. These changes are mandatory and carry fixed penalties for non-compliance.  

These rules affect most owner-managed businesses in the UK, so it’s critically important to get this right! Fortunately, we’re here to help.

What is a close company?

Let’s start with the fundamentals. A close company, in tax terms, is a company that is controlled by five or fewer "participators" (usually shareholders) or by any number of participators who are also company directors.

The majority of owner-managed businesses (OMBs) and family-run businesses fall under this category. This includes single-person consultancy businesses, trading companies owned by a married couple, as well as small agency partnerships structured as limited companies.

What about director-shareholders?

If you are both a director and a shareholder in your own company, you should assume these rules apply to you too, unless you have been specifically advised otherwise by someone with deep knowledge of the rules.

What was the previous situation?

Previously, your Self-Assessment Tax Return had to include your total dividend income as a single figure. In other words, dividends from your own company, ISA-held shares or from investment funds were bundled together.

This meant HMRC could clearly see what you received, but didn’t have visibility over where it came from or, crucially, what percentage of a business you owned when you received it. Given HMRC is now laser-focused on data-driven risk profiling, closing this gap was inevitable.

So what do directors need to report from 2025/26?

In your 2025/26 Self-Assessment (filed from April 2026 onwards), directors of close companies must report specific information for each company they’re involved with.

Here’s the list:

• The company name
• The Companies House registration number
• Dividends received from that company during the tax year, reported separately from other dividend income
• The highest percentage shareholding you held at any point during the year, even if that position has since changed or the shares have been sold
• Whether you were a director of a close company at any point during the year

Important

Even if the company paid no dividends, it still needs to be reported with a dividend figure of £0.00. It needs to be declared at P60 stage if payroll, at dividend (if just dividend), or in the unpaid section if it’s just a directorship. This is an easy one to miss!

Why has HMRC made this change?

HMRC has made this change in an attempt to make Self-Assessment returns more accurate and reduce the tax gap. These changes give HMRC a clearer picture of how owner-managers are structuring their pay.

It gives HMRC the ability to cross-reference what you declare on your tax return with what Companies House and corporate tax filings say about the business.

This, linked with Companies House ID check requirements, however, means they have a full picture of ownership across all companies you own. You are just confirming the information.

Penalties for close company reporting

Naturally, HMRC will be dishing out penalties for noncompliance with the new reporting requirements for close company directors. There will be a £60 fixed penalty for each required item of information that is missing. In other words, if you were to omit the company name and shareholding percentage from one tax return, that could mean a £120 penalty.

Crucially, this penalty will apply even if your tax calculation is correct and the right amount of tax is paid! These changes will not change the tax paid for now – it's just data input.

Things to watch out for

As we mentioned earlier, there is no need to panic about these changes; however, there are some key areas to focus on to help you avoid a penalty. Mistakes are easy to make, so qualified advice is strongly encouraged to make sure you start out on the right track.

Have shareholdings changed?

If shares were transferred, issued or bought back during the year, you need to report the highest percentage held at any point, NOT an average and NOT the year-end position. This could easily catch out directors who reduced their stake mid-year and assumed the lower figure was the one to use.

Are there multiple share classes?

If a company issues different share classes with different rights, calculating a single percentage shareholding becomes tricky. Extra care should be taken here, especially as HMRC guidance is still developing. Strong bookkeeping is essential!

Are there non-dividend-paying directors?

But even if you took zero salary and zero dividends, HMRC still needs to know about your director status. If you are a completely unpaid director, you can't just skip the Employment pages; you must explicitly declare the role in the unpaid directorship section of your return.

Note: If your company paid no dividends at all this year, remember you still have to report it with a dividend figure of £0.00 rather than leaving it blank. This is another incredibly easy one to miss if you're used to just skipping sections that don't apply!

When do close company director reporting rules change?

• The rules listed in this blog apply from 6 April 2025.  
• The first affected return is the 2025/26 Self-Assessment, with a filing deadline of 31 January 2027.
• If you file early, these sections will need to be completed then.

What should you be doing?

These changes are easy to adapt to with the right approach to your numbers. Good accounting and bookkeeping will place you in good stead for this and future reporting requirements.

• Make sure your dividend paperwork, board minutes and share register are complete and consistent.
• Keep a record of shareholding percentages throughout the year, not just at 5 April.
• If your company has unusual share structures or saw any ownership changes during 2025/26, flag them NOW, not at filing time.
• If you have been using the same approach to your return as in previous years, it is worth checking that it still works for 2025/26 before you submit.

For most directors, the additional reporting will be perfectly manageable with accurate records. That starts with the fundamentals: good data management, regular bookkeeping, and the right software connected to your finance function.

None of this needs to be complicated with the right preparation. Reach out to us today if you want help getting set up properly.