New Dividend Rules: What Company Directors Must Now Report to HMRC
Most of the recent noise about company compliance has been about Companies House. But a quieter change, this one from HMRC, lands directly on the personal tax return of anyone who runs their own limited company - and it takes effect now, for the 2025/26 tax year.
If you are a director of a close company and you pay yourself in dividends, the way you report those dividends has changed. It is not a large amount of extra work, but it is easy to get wrong, and HMRC has attached a penalty to each detail you miss.
What is a "close company"?
In plain terms, a close company is one controlled by five or fewer people (or by its directors). That definition captures the overwhelming majority of owner-managed UK limited companies - so if you own and run your business, this almost certainly means you.
What has actually changed
For 2025/26 Self Assessment returns - the ones filed from April 2026 onwards - directors of close companies must now give HMRC more detail than a single dividends figure. On the return you must report:
- The dividends you received from each close company separately, naming the company - not lumped in with dividends from other shares and funds, and reported even where the figure is nil.
- The company’s registered number, so HMRC can tie the dividend to the right company on the register.
- The highest percentage shareholding you held in that company at any point during the year - the peak figure, even if your holding changed part-way through.
The reason is transparency: HMRC wants to match what a company distributes against what its directors declare, and to see shareholdings that move during the year. The information sits in additional boxes on the return under the Income Tax (Additional Information to be included in Returns) Regulations 2025.
The part that catches people out
The penalty is per missing item, per company. Leave out a company registration number, a dividend figure or a shareholding percentage and each omission can cost £60. For a director involved in two or three companies, a few careless gaps add up quickly - and they are exactly the kind of detail that gets overlooked when a return is rushed in January.
The practical risk is not the headline rule; it is the housekeeping behind it. To file accurately you need to know, for each company, your exact registered number, the dividends actually voted and paid in the year, and how your shareholding moved. If your statutory registers and dividend paperwork are not in good order, that information is surprisingly hard to reconstruct after the year has closed.
What to do now
- Keep dividend vouchers and board minutes for every dividend, as you go - not reconstructed at year end. Each dividend should be properly declared and documented at the time.
- Check your register of members is current, so your shareholding percentages - including any mid-year changes - are accurate and evidenced.
- Have each company’s registered number to hand for whoever prepares your return.
- If you sit on the board of more than one company, keep the records separate and clearly labelled - the reporting is company by company.
How First CoSec can help
This is the unglamorous side of running a company - the registers, the minutes, the dividend paperwork - and it is precisely what an outsourced company secretary keeps in order all year round, so the information HMRC now wants is already there when your accountant asks for it. We maintain your statutory registers, document dividends correctly as they are declared, and keep your Companies House record straight, for a fixed fee. If you would like a hand getting your company’s house in order before the next return, contact us at enquiry@firstcosec.co.uk.
Note: this article covers company secretarial record-keeping, not personal tax advice - your accountant should complete your return.