From 6 April 2025, directors of close companies will face a change in how they report dividend income on their Self-Assessment tax returns.
What is changing to Dividend Income Reporting?
Currently, directors reporting dividend income on their Self-Assessment tax returns are only required to declare the total amount received across all sources.
There is no obligation to distinguish between dividends paid by their own company and those received from external investments or other shareholdings.
From the 2025/26 tax year onward, that will no longer be sufficient.
Directors of close companies will need to itemise income from each company in which they hold shares and disclose additional details, including:
- The name of the company
- The company’s registration number
- The highest percentage shareholding held during the tax year
- The exact amount of dividend income received from that specific company
This information must be presented separately from other dividend income and will become a compulsory part of the Self-Assessment process.
What is a ‘close company’?
A close company is a UK-resident limited company that is under the control of:
- Five or fewer participators (shareholders), or
- Any number of participators who are also directors
In practice, this means most owner-managed or family-run limited companies will fall within the definition. So if you are a director-shareholder in a small private company, chances are your business qualifies as a close company.
Why is HMRC making this change?
At present, HMRC has limited visibility into how much dividend income reported by taxpayers originates from their own companies.
The changes come amid ongoing efforts by the Government to close the tax gap and improve oversight of owner-managed business structures.