If you’re a director of a close company, HMRC is now paying much closer attention to how money moves between you and your business. That means you’ll probably have more to report on your Self Assessment tax return than you have in previous years.
From the 2025/26 tax year onwards, there are new reporting rules for directors of close companies. They don’t change how much tax you pay, but they do change what you have to tell HMRC. The aim is simple: the government wants a clearer, more detailed view of how owner-managed businesses work and how directors are actually paid, so it can check that any money taken out of the company is being taxed correctly.
As a director, you’ll now need to give extra information for every close company you’re involved with; things like how much of the company you own, how the shares are structured, and any income you receive that isn’t just your basic salary.
These changes mark a real shift in how HMRC monitors a company's cash flow, and they're likely a sign of even more detailed reporting to come.
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What is a “Close Company”?
Put simply, a close company is a private business that’s controlled by a small number of people. In most cases, that means either a company with five or fewer "participators" (shareholders) or a company where all the shareholders are also its directors.
Because of their structure, the majority of UK small businesses, family-run firms, and owner-managed entities fall into this category.
New Mandatory Disclosures for Directors
Starting with the 2025/26 tax year, your Self Assessment will ask for significantly more detail regarding your relationship with your company and the days of reporting a single, total figure for all of your dividends are over. Instead, HMRC wants to know what each close company has paid you and how that relates to your role and your shareholding in that business.
What's Changing?
In the past, ticking the SA102 box to say you were a director of a close company was mostly optional. HMRC will now require a company‑by‑company breakdown for every close company where you were a director at any point in the tax year. For each one, you’ll be asked to provide:
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Director status – confirm whether you were a director of a close company
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Company details – the full company name and Company Registration Number (CRN)
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Dividend income – the exact amount received from each close company, shown separately
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Your shareholding – the highest percentage of shares you held during the tax year
These disclosures still apply even if:
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You took no salary
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You received no benefits
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Your dividends fall within available allowances
Increased Scrutiny on the Tax Gap
To understand these changes, you have to look at the "big picture" from HMRC’s perspective. According to their June 2025 report, there is a £46.8 billion gap between the tax that should be collected and what actually reaches the Treasury.
HMRC’s own figures show that small businesses are responsible for around 60% of this tax gap. At the same time, the way money moves between a small company and its directors has long been a grey area, with personal and business finances sometimes hard to separate.
By collecting more detailed information, HMRC can:
- Link company profits more clearly to director and shareholder income
- Spot inconsistencies, such as low salary with high drawings and no declared dividends
- Target enquiries where it believes profits may not have been taxed correctly
The New Penalty Regime
To back up these new rules, HMRC has also brought in a specific penalty framework for the extra information it now requires.
What May Be Coming Next
Although the current rules are mainly about dividends and shareholdings, they’re unlikely to be the end of the story. In March 2026, HMRC launched a formal consultation on going further, looking at much more detailed reporting on transactions between close companies and their owners.
As part of this, HMRC is considering mandatory reporting for:
- Cash withdrawals
- Directors’ loan account (DLA) movements
- Asset transfers and write-offs
Next Steps for Directors of Close Companies
These changes do add another layer of admin, but they do not stop you paying yourself fairly from your own company. What they really ask for is better organisation and clearer records.
A good place to start is with the basics:
1. Speak to your accountant early
Do not leave this until filing time. Have a quick conversation now about what information will be needed and how these disclosures will appear on your return.
2. Check your company records
Make sure you have the correct Company Registration Number (CRN) for every business where you are a director. It is also worth checking that your share certificates and ownership records are up to date.
3. Track share changes as they happen
HMRC wants the highest percentage of shares you held at any point in the tax year. If ownership changes during the year, make a note of the date and the before-and-after position as soon as it happens.
4. Separate your dividend sources
Keep dividends from your own company separate from dividends paid by ISAs, trading platforms, or other investments. This makes it easier to put the right amounts in the right place on your tax return.
5. Put a simple record-keeping system in place
Even a basic system can make a big difference. For example, tagging director-related transactions in your accounting software can save time, reduce errors, and help your accountant work more efficiently.
Turning Admin into an Advantage
Handled well, these new rules can be more than just a compliance exercise. They’re also a chance to improve how you record money moving between the company and its owners.
Yes, your reporting burden is growing, but so is your control over the numbers. When your records are in good order:
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Your finances are easier to understand
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Your company and personal tax positions are easier to reconcile
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You get a clearer view of how you actually take value out of the business
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