New Disclosure Requirements for Directors of Close Companies: What Directors Need to Know
Recent changes to UK tax reporting requirements have introduced enhanced disclosure obligations for individuals who are directors of close companies for the 2025-26 tax year onwards. These developments form part of HMRC’s broader initiative to improve transparency, strengthen compliance, and better target areas of perceived tax risk—particularly in owner-managed businesses.
This article outlines the key changes, their practical implications, and considerations for taxpayers.
What Has Changed?
Previously, taxpayers have reported UK dividend income as a single combined figure. Under the updated requirements, directors are now required to disclose dividends received from close companies separately.
The new requirements go further and require directors of close companies to include an employment page for that directorship even if there has been no income or dividends received from the company.
In practical terms, this means:
- Dividend income may need to be categorised more clearly
- Additional detail about the source of dividends may be required
- Details of all directorships of close companies will require disclosing
For many directors, particularly those of owner-managed businesses, this represents a noticeable shift in reporting obligations.
What is a Close Company?
A close company is a UK resident company that has five or fewer shareholders, or all shares are owned by its directors. In practice, this includes the vast majority of owner-managed and family-run businesses.
Dividends paid by such companies have long been subject to scrutiny by HMRC due to the potential for income extraction strategies that may reduce overall tax liabilities compared to salary.
What Information Will Be Required?
From 2025-26 HMRC will require directors to provide more specific information about their dividend income from close companies.
For each close company taxpayers are directors of the following information will need including on the employment pages of their tax return:
- Name of close company
- The company’s registration number
- The company’s PAYE reference number (if applicable)
- Total dividends received from the company (even if £NIL)
- Total percentage of share capital owned (even if £NIL)
If your shareholding changed during the year, you’ll need to report the highest percentage held at any point in the tax year.
Why HMRC Is Introducing These Changes
The enhanced disclosure requirements are part of a broader compliance strategy. HMRC has identified dividends from close companies as an area where additional transparency is beneficial.
In particular, the changes are intended to:
- Improve HMRC’s ability to assess tax risk
- Enable more effective cross-checking against company records
- Highlight cases where income may be structured in a tax-efficient manner
It is important to note that the underlying tax treatment of dividends has not changed. The focus is on reporting, not new tax charges.
Are there any penalties?
This change relates to disclosures on tax returns and not taxpayers tax liabilities and as such falls outside the existing penalty framework.
HMRC has therefore introduced a new fixed penalty of £60 for each instance of non-compliance. This means:
- Every missing, incomplete or incorrect instance of required disclosure could trigger a penalty
- Multiple disclosure inaccuracies could result in multiple £60 charges
Maintaining clear and organised records will therefore be essential.
Steps Taxpayers Should Take
To remain compliant under the new requirements, directors should consider the following actions:
- Review your dividend income sources
Identify whether any dividends received are from close companies.
- Gather the necessary information early
Do not wait until filing deadlines to obtain company details or supporting documentation.
- Keep clear and complete records
Maintain a structured record of all dividend payments received during the tax year and changes to ownership in close companies.
- Check your tax return carefully before submission
Ensure that all required disclosures are accurate and complete.
Conclusion
The introduction of enhanced disclosure requirements for dividends from close companies marks a clear shift towards more detailed and transparent reporting within the self-assessment system.
For affected taxpayers, the key impact is not a change in how dividends are taxed, but in how they must be reported. With increased scrutiny likely in this area, careful record-keeping and accurate disclosure will be essential.
Taking a proactive approach now will help ensure compliance and reduce the risk of HMRC enquiries in the future.
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