{"id":6288,"date":"2025-04-01T09:17:40","date_gmt":"2025-04-01T08:17:40","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=6288"},"modified":"2025-04-01T08:17:44","modified_gmt":"2025-04-01T08:17:44","slug":"major-changes-ahead-for-directors-of-close-companies-new-dividend-reporting-rules-from-april-2025","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/major-changes-ahead-for-directors-of-close-companies-new-dividend-reporting-rules-from-april-2025\/","title":{"rendered":"Major changes ahead for directors of close companies \u2013 New dividend reporting rules from April 2025"},"content":{"rendered":"

From 6 April 2025, directors of close companies will face a notable change in how they report dividend income on their Self-Assessment tax returns.<\/span><\/p>\n

<\/p>\n

Under the updated rules introduced by HM Revenue & Customs (HMRC), more detail will be required and is a change set to impact an estimated 900,000 directors across the UK.<\/span>\u00a0<\/span><\/p>\n

More paperwork ahead for directors of close companies<\/span><\/b>\u00a0<\/span><\/h3>\n

Currently, directors reporting dividend income on their Self-Assessment tax returns are only required to declare the total amount received across all sources.\u00a0<\/span>\u00a0<\/span><\/p>\n

There is no obligation to distinguish between dividends paid by their own company and those received from external investments or other shareholdings.<\/span>\u00a0<\/span><\/p>\n

From the 2025\/26 tax year onward, that will no longer be sufficient.\u00a0<\/span>\u00a0<\/span><\/p>\n

Directors of close companies will need to itemise dividend income from each company in which they hold shares and disclose additional details, including:<\/span>\u00a0<\/span><\/p>\n

    \n
  • The name of the company<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
      \n
    • The company\u2019s registration number<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
        \n
      • The highest percentage shareholding held during the tax year<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
          \n
        • The exact amount of dividend income received from that specific company<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

          This information must be presented separately from other dividend income and will become a compulsory part of the Self-Assessment process.<\/span>\u00a0<\/span><\/p>\n

          What is a \u2018close company\u2019?<\/span><\/b>\u00a0<\/span><\/h3>\n

          A close company is broadly defined as a UK-resident limited company that is under the control of:<\/span>\u00a0<\/span><\/p>\n

            \n
          • Five or fewer participators (shareholders), or<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
              \n
            • Any number of participators who are also directors<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

              In practice, this means most owner-managed or family-run limited companies will fall within the definition.\u00a0<\/span>\u00a0<\/span><\/p>\n

              If you are a director-shareholder in a small private company, chances are your business qualifies as a close company.<\/span>\u00a0<\/span><\/p>\n

              Why is HMRC making this change?<\/span><\/b>\u00a0<\/span><\/h3>\n

              The motivation behind the reform is to improve visibility.\u00a0<\/span>\u00a0<\/span><\/p>\n

              At present, HMRC has limited insight into how much dividend income reported by taxpayers originates from their own companies versus external investments.<\/span>\u00a0<\/span><\/p>\n

              The changes come amid ongoing efforts by the Government to close the tax gap and improve oversight of owner-managed business structures.<\/span>\u00a0<\/span><\/p>\n

              New questions on the Self-Assessment return<\/span><\/b>\u00a0<\/span><\/h3>\n

              In addition to reporting more detailed dividend information, taxpayers will now be required to answer whether they were a director of a close company at any point during the tax year.\u00a0<\/span>\u00a0<\/span><\/p>\n

              This will be a compulsory question on the Self-Assessment form for 2025\/26 and beyond.<\/span>\u00a0<\/span><\/p>\n

              This means directors must keep accurate records of:<\/span>\u00a0<\/span><\/p>\n

                \n
              • Changes to shareholdings during the year<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
                  \n
                • Different share classes and associated rights<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
                    \n
                  • Dividend declarations and payments received<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

                    The new disclosure requirements are particularly important for those with more complex shareholding structures or who have changed ownership during the year.<\/span>\u00a0<\/span><\/p>\n

                    Other developments \u2013 Employee hours reporting scrapped<\/span><\/b>\u00a0<\/span><\/h3>\n

                    In a separate development, the Government has confirmed that it will no longer pursue the plan to mandate reporting of actual hours worked by employees through payroll.<\/span>\u00a0<\/span><\/p>\n

                    Originally scheduled for April 2026, the measure was dropped due to the significant administrative burden it would have placed on employers.\u00a0<\/span>\u00a0<\/span><\/p>\n

                    The implementation cost was estimated at nearly \u00a360 million.\u00a0<\/span>\u00a0<\/span><\/p>\n

                    While this will come as a relief to many businesses, it serves as a reminder that HMRC continues to explore new ways to collect data and increase transparency in other areas.<\/span>\u00a0<\/span><\/p>\n

                    Preparing for 2025\/26<\/span><\/b>\u00a0<\/span><\/h3>\n

                    If you are a director of a close company, it\u2019s important to start preparing now for the new requirements. This includes:<\/span>\u00a0<\/span><\/p>\n

                      \n
                    • Reviewing your shareholding structure<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
                        \n
                      • Ensuring proper records of dividend declarations are maintained<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
                          \n
                        • Confirming company registration details<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

                          The increased scrutiny on dividends highlights HMRC\u2019s ongoing focus on owner-managed businesses.\u00a0<\/span>\u00a0<\/span><\/p>\n

                          Ensuring that your Self-Assessment return is accurate, detailed and compliant will be required to avoid delays, enquiries or potential penalties.<\/span>\u00a0<\/span><\/p>\n

                          Unsure whether your company qualifies as \u2018close\u2019? Need help with the upcoming reporting requirements?<\/span>\u00a0<\/span><\/p>\n

                          Our specialist accountancy team is here to help you with clarity on your company\u2019s status or practical support in preparing for the 2025\/26 Self-Assessment changes. Contact us today.\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

                          From 6 April 2025, directors of close companies will face a notable change in how they report dividend income on their Self-Assessment tax returns.<\/p>\n","protected":false},"author":2,"featured_media":6291,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6288"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6288"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6288\/revisions"}],"predecessor-version":[{"id":6289,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6288\/revisions\/6289"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6291"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}