Close company reporting is becoming more detailed. From the 2025/26 tax year, directors of close companies will have to provide more information than before when completing their self-assessment tax returns.
In the longer term, close companies themselves may also have to provide much more detail to HMRC.
For many small limited company directors, this is worth noting early. The changes are not just an admin point. They could make it easier for HMRC to compare personal tax returns with company records.
Why dividend income is under closer review
HMRC already receives information about some types of income.
For example, financial institutions report savings income to HMRC. This makes it easier to check whether taxpayers have declared the right amount.
Dividend income has been harder to check. This is particularly true where the income comes from a close company.
In many cases, dividends may be credited to the director’s loan account or current account. They may not always be paid out directly.
That can make the position less obvious. As a result, HMRC has had fewer ways to check whether the taxpayer reported the income correctly.
HMRC is focusing on small businesses
The latest tax gap is estimated to be more than £45 billion. Small businesses represent the largest proportion of that shortfall.
HMRC has already looked more closely at this area.
It previously ran a targeted campaign aimed at directors it suspected had not declared dividends. HMRC based this on a review of company accounts.
The new reporting requirements should give HMRC more data to work with.
What directors will need to provide
Self-assessment tax returns will now need to include a separate employment page for each directorship of a close company.
This applies even if the director receives no salary or dividends from the company.
Directors will need to provide:
- the name of the close company
- the company registration number
- the amount of dividend income received from the company
- the percentage shareholding in the company
This means directors may need to gather more information before completing their tax return.
It also means records should be kept clearly throughout the year.
Why this matters for close companies
Once close companies have to provide more detailed information, HMRC should be able to cross-check both sides.
For example, HMRC could compare what a director reports personally with what the company reports.
This is why close company reporting may become more important for directors and business owners. The information provided by the individual and the company will need to be consistent.
Further reporting changes are under consultation
HMRC is also consulting on wider reporting requirements for close companies.
The proposals could mean companies have to report more than dividends.
They could also have to provide details of:
- cash withdrawals
- loans
- debts
- transfers of assets between the company and its director or directors
These proposals are still at the consultation stage. However, they show the direction of travel.
HMRC wants more visibility over the relationship between close companies and their directors.
The limited company decision is changing
The tax cost of operating through a limited company has increased over recent years.
Because of this, an unincorporated structure has generally become more attractive for some businesses.
The new reporting requirements are likely to reinforce that decision for some business owners.
That does not mean a limited company is the wrong structure. However, it does mean directors should understand the tax, reporting and compliance responsibilities that come with it.
What directors should do now
Directors of close companies should make sure dividend records, loan account movements and shareholding details are clear and up to date.
This will make it easier to complete self-assessment tax returns accurately.
It may also reduce the risk of queries later, especially as HMRC gains more information from company records.
The self-assessment tax return notes include details of the new reporting requirements. Sections 7.1 to 7.4 relate to the employment section.
If you are a close company director and are unsure how these changes affect your tax return, it is worth getting advice before filing. The earlier the information is reviewed, the easier it is to correct any gaps.