What’s changing and how to prepare
For 2025/26 tax returns onwards, directors of close companies will be required to make additional disclosures on their self-assessment tax returns (SATRs). HMRC have suggested that the aim of these changes is to improve the quality of data they collect from owner‑managed businesses to strengthen compliance monitoring.
Although the new requirements do not change who must complete a tax return, they do significantly affect what must be reported, and failure to comply can now trigger fixed penalties.
Who is affected?
The new disclosure rules apply to individuals who are:
- directors of close companies, and
- required to file a SATR for 2025/26 or later.
A close company is broadly defined as a UK‑resident company controlled by five or fewer participators, or by its directors. In practice, this includes the majority of owner‑managed and family run companies.
What information do I need to report?
The SATR previously asked whether an individual was a company director and whether the company was close, but completion of these questions has only become mandatory from 6 April 2025
If the answer is yes to the above, the individual must then provide further disclosures for those companies, separately declaring any dividends received from those companies.
The following details are required for each relevant close company:
- Company name
- Companies House registration number
- Total dividends received from that close company during the year (including nil amounts)
- Highest percentage shareholding held at any point during the tax year (even if zero)
This represents a fundamental shift from the previous approach, under which all UK dividends could be aggregated and reported in a single figure. Further, information will need to be provided for directorships in close companies even where they have not received a dividend during the tax year and/or even if they are not even a shareholder.
Reporting the ‘highest percentage shareholding’
Particular attention is required for the shareholding disclosure. Where a director’s interest in a company varies during the year (for example due to share transfers, new issues or reorganisations), the return must show the maximum percentage held during that tax year, even if that holding no longer exists at the year‑end.
Determining the relevant percentage could be particularly complex where companies have multiple share classes. Based on the legislation, it is anticipated that the calculation should be based on nominal value of the shares rather than voting or dividend rights etc. and, where relevant, preference shares will need to be included within that calculation. Further HMRC guidance has been requested by the professional bodies on this which will hopefully be forthcoming soon.
New penalties for non‑compliance
To support enforcement, a new fixed penalty regime has been introduced. A £60 penalty per failure can be charged for missing or incomplete disclosures.
This is quite a surprising move given that this information does not directly affect the tax calculation and that multiple penalties could potentially be charged on one return.
Practical steps for directors
To ensure you can comply with the new requirements, we would recommend:
- Reviewing all directorships held to determine whether they meet the definition of a close company
- Maintaining separate records of dividends paid by any close companies
- Tracking changes in shareholdings during the relevant tax year
Consultation on additional reporting requirements for close companies
In addition to the above, a wider HMRC consultation is also ongoing, looking at additional reporting requirements for close companies in respect of any transactions between the company and its participators.
If plans go ahead, close companies could be required to provide HMRC with details of transactions such as cash withdrawals, loans, debts, dividends, other distributions, and transfers of assets to and from the company.
