New Self Assessment rules for directors of close companies

Directors of owner-managed and family businesses will need to provide more information when completing their 2025/26 Self Assessment tax returns.

New reporting requirements mean that directors of close companies must now disclose specific information about the company, their shareholding and any dividends they have received.

Although these changes do not create a new tax charge, they will give HMRC greater visibility over the relationship between directors, shareholders and their companies.

For affected directors, accurate company records and dividend paperwork will therefore be more important than ever.

What is a close company?

A close company is broadly a UK company controlled by:

• five or fewer participators, or
• any number of participators who are also directors.

A participator will usually be a shareholder, although the definition can include other individuals with a financial interest in the company.

In practice, many small, family-owned and owner-managed limited companies are close companies.

What are the new Self Assessment rules for close companies?

The changes apply to personal tax returns for tax years after 2024/25, beginning with the 2025/26 Self Assessment return.

Directors must confirm whether they were a company director during the tax year and whether the company was a close company.

Where the answer is yes, the director must also provide:

• the company’s name
• the company’s registered number
• the total dividends received from the company during the tax year
• the highest percentage of the company’s share capital they held during the tax year.
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A separate Employment supplementary page may be needed for each directorship.

The dividend figure must be included even where the amount received was zero. Similarly, the shareholding percentage may be zero where the individual was a director but did not own shares.

How is the shareholding percentage calculated?

Directors must report the highest percentage of share capital held at any point during the tax year.

This means the figure may not simply be the percentage owned on 5 April.

For example, if a director owned 50% of the company at the start of the year but transferred some shares and held 25% at the end of the year, the percentage reported would generally be 50%.

Businesses that have completed share transfers, introduced new shareholders or reorganised their share capital should ensure the relevant dates and percentages have been recorded correctly.

Why has HMRC introduced the changes?

Previously, dividend income was generally reported as a combined figure on an individual’s tax return. The additional disclosures will make it easier for HMRC to compare information reported by a director with information held about the company.

The changes form part of a wider move towards more detailed reporting and closer comparison of corporate and personal tax information.

HMRC has also consulted on possible future requirements for close companies to report more detailed information about transactions with participators, including loans, dividends, asset transfers and other payments. These wider company reporting proposals remain separate from the new Self Assessment requirements and should not be treated as rules already in force.

Why dividend records matter

Dividends must be supported by sufficient distributable profits and properly authorised by the company.

Good records would normally include board minutes, dividend vouchers, payment records and a clear schedule showing which shareholder received each dividend.

Informal withdrawals from the company bank account should not automatically be treated as dividends. Depending on the circumstances, they may instead represent salary, expenses, a director’s loan or another type of payment.

The increased level of reporting means discrepancies between company accounts, dividend paperwork and personal tax returns may be easier for HMRC to identify.

What should close company directors do now?

Directors should not wait until the Self Assessment deadline to gather the required information.

Reviewing share records and dividend documentation early can help identify missing paperwork, incorrect ownership details or differences between the company’s accounts and the director’s personal records.

This is particularly important where:

• shares changed hands during the year
• different classes of shares are in issue
• dividends were paid at several points during the year
• the director has interests in more than one company
• money has been withdrawn through a director’s loan account.

Support with your 2025/26 Self Assessment return

The new Self Assessment rules for close companies place greater emphasis on accurate, consistent records across both the company and its directors.

At Ad Valorem, we can help you understand how the requirements apply, review your dividend and shareholding records and ensure the correct information is included in your tax return.

Speak to our team to make sure you are prepared for the new reporting requirements and that your company and personal tax records remain aligned.

(E) enquiries@advaloremgroup.uk (T) 01908 219100 (W) advaloremgroup.uk