Close company directors face new Self Assessment reporting rules

From the 2025/26 tax year, directors of close companies will need to give HMRC more detail on their Self Assessment tax returns.

For many business owners, this change will feel small at first glance. In practice, it creates one more area where good record keeping matters.

The new rules affect directors of close companies – which, in plain English, often means owner-managed limited companies. HMRC now wants clearer information about the link between the director, the company, share ownership and dividends taken in each tax year.

For directors who take dividends from their own limited company, this means the tax return needs to do more than report total dividend income. It must also show how much came from each relevant close company.

What is a close company?

A close company usually means a UK-resident company controlled by five or fewer participators, or by its directors. A participator usually means someone with a financial interest in the company, such as a shareholder.

In practical terms, many small limited companies, family companies and owner-managed businesses fall within this definition.

What changes from 2025/26?

The main change in the 2025/26 Self Assessment tax return is that directors of close companies need to give extra information on the SA102 Employment pages.

Previously, HMRC’s SA102 form only asks directors to confirm whether the company was a close company. The 2025/26 pages now asks directors to complete extra boxes including: percentage shareholding at the highest point of ownership in year.

Here we go with the key details:

– The company’s name

– The company registration number

– The dividends received from that close company – even if zero

– The director’s percentage shareholding in that close company at the highest point of ownerships in year

If the dividends amount in the tax year was zero in your close company – you must still put zero into the close companies dividend box

In addition to entering total close company dividend income in your close company, you must also disclose within the usual dividend box. (Please see below)

This process of the employment pages must be completed for each close company you are director of.

Why business owners need to take this seriously

For many directors, dividends form part of their usual income planning.

You may take a small salary and then draw dividends from company profits. You may also hold investments that produce dividend income. Until now, HMRC has seen the total dividend figure on the return, but that hasn’t always shown individually which dividends came from your own company.

Now, company directors need to show a detailed breakdown of dividends – identifying the source of each dividend.

For example, say you receive £20,000 in total dividends during the year. Of that, £5,000 comes from your own close company and £15,000 comes from other investments.

You still enter the full £20,000 as dividend income on the main tax return, but now you also enter the £5,000 close company dividend in the new SA102 close company section –  this gives a breakdown of the dividends taken for HMRC’s viewing purpose.

Your shareholding may change during the year. You may issue shares, transfer shares, restructure share classes or change ownership between family members. The tax return asks for the highest percentage held during the tax year, not simply the figure at the year end. You must use the highest percentage shareholding held during the year, based on the nominal value of the shares.

That point matters.

Your shareholding may change during the year. You may issue shares, transfer shares, restructure share classes or change ownership between family members. The tax return asks for the highest percentage held during the tax year, not simply the figure at the year end.

Why does this sit in the employment section?

This part may feel odd.

Dividends don’t count as employment income, so many directors expect these questions to sit only in the dividend section. However, HMRC has placed the new questions in the SA102 Employment pages because a directorship counts as an office or employment for tax return purposes.

* Where someone acts as a director of more than one close company, the process will need repeating for each company.

What records should directors keep?

Directors should keep clear records throughout the year, rather than trying to pull the details together at tax return time.

You should keep –

– Dividend vouchers

– Board minutes approving dividends

– The company registration number

– Shareholding records

– Record of the share classes, any share transfers and share issues

– Records showing dormant or nil-dividend periods

* This matters even where no dividend has been paid.

Where no dividend came from your close company, the dividend entry must show £0.

What about dormant or insolvent companies?

Directors must include dormant and insolvent close companies.

For business owners, the safest approach is simple – tell your accountant or tax advisor about every company directorship you held during the year.

That includes –

– Trading companies

– Dormant companies

– Companies with no salary

– Companies with no dividends

– Companies being wound down

– Insolvent companies

– Companies where you resigned during the year

Your accountant or advisor can help decide how to report each one.

What penalties apply?

For every omission, HMRC may charge a £60 penalty.

Missing company details, incorrect dividend splits or an omitted directorship could create unnecessary penalties, queries and admin.

How might HMRC check the information?

HMRC already holds a wide range of data about companies, directors and shareholders.

That may include:

– Self Assessment records

– PAYE records

– Company Tax Returns

– Corporation Tax filings

– iXBRL accounts

– Companies House records

The government has also consulted on modernising reporting for company payments to participators, and HMRC’s consultation says directors should complete SA102 and indicate whether the company is close.

In plain terms, HMRC wants a clearer joined-up picture.

Business owners shouldn’t assume these details will sit unnoticed in a return. The new questions give HMRC cleaner data to compare against other records.

What should business owners do now?

The best step is to make sure your records line up before the return needs filing.

Start with a list of every company where you acted as a director during the tax year. Then, for each company, check:

– Was it a close company?

– What was the correct company name?

– What was the Companies House registration number?

– What was your highest shareholding percentage during the year?

– Did you receive dividends from that company?

– Were dividends properly recorded with vouchers and minutes?

– Did you receive dividends from other sources too?

– Did you resign as a director during the year?

– Did the company cease mid-year? If so, it still needs to be on tax return

This preparation will help your accountant complete the return correctly and avoid last-minute questions.

The bigger point for director-shareholders

This change shows HMRC’s growing focus on owner-managed companies.

For many directors, salary, dividends, loans and share ownership form part of normal tax planning. HMRC now wants better data on how those pieces connect.

That doesn’t mean directors have done anything wrong. It just means that business owners need cleaner records and clearer reporting.

The first year of any new reporting rule often brings practical issues. Software may need updates. Accountants may need extra details from clients. Directors may need to find information they haven’t tracked closely before.

The earlier you prepare, the easier the process will feel.

Speak to us sooner rather than later

Are you a director of a close company?

Do you take dividends from your own limited company?

Have you held directorships in dormant, non-trading or family companies during the tax year?

Contact Dux Advisory today – we’re ready to make sure you’re ready.

We’ll help you understand what HMRC needs, check your records and make sure your Self Assessment tax return includes the right close company information.

A little preparation now will help you avoid missed details, rushed answers and avoidable penalties later.