HMRC Close Company Director Disclosure Rules 2025/26

HMRC is tightening its grip on the financial dealings between close companies and their directors. With new rules taking effect from 6 April 2025, an estimated 900,000 directors, particularly those involved with small property companies, will face increased scrutiny on their personal tax returns. This change is not merely an administrative tweak, it represents a strategic shift by HMRC to improve visibility over potential tax avoidance, undeclared income, and non-compliant financial arrangements within closely held businesses.

The 2025/2026 tax year, for which Self Assessment returns will be filed in 2026, marks the first period where these expanded disclosure obligations will apply. Directors must be prepared to provide a granular level of detail that goes beyond previous requirements, encompassing comprehensive breakdowns of dividend payments, a clear overview of shareholdings, and meticulous records of all movements on their Director's Loan Accounts. This guide will walk you through the specifics of these new rules, explain who is affected, and outline the essential steps directors must take to ensure full compliance and avoid potential penalties.

Understanding Close Companies and Affected Directors

The new HMRC disclosure rules specifically target "close companies" and their directors. To understand the impact, it is crucial to first define what constitutes a close company and who falls under the definition of a director for these purposes.

What is a Close Company?

Under UK tax law, a company is generally considered "close" if it is controlled by five or fewer "participators" or by its directors. A participator is broadly defined as a person who has a share or interest in the capital or income of the company, including shareholders, loan creditors, or their "associates." Associates can include relatives, partners, or trustees. This definition captures a vast majority of small and medium-sized family businesses, owner-managed companies, and many investment vehicles, including property companies.

Control by five or fewer participators

More than 50% of the company's shares or voting rights are held by five or fewer 'participators' (shareholders, loan creditors, or associates).

Control by directors

The company is controlled by its directors, regardless of their shareholding.

Loan creditors

More than 50% of the company's shares are held by loan creditors, and the company is controlled by directors.

Certain types of companies excluded

Companies that are not close companies include those where the public holds 35% or more of the voting shares and certain investment companies.

The specific mention of "small property companies" in HMRC's announcement highlights a particular area of interest for the tax authority. These companies often hold significant assets and generate income through rents or property sales, with directors typically having substantial financial interactions with the company. HMRC's focus here is likely driven by a desire to ensure that income and capital gains are correctly attributed and taxed, preventing the use of company structures to obscure personal income or assets.

Who is Considered a Director?

For tax purposes, the term "director" is broader than just those formally appointed to the board and registered at Companies House. It includes any person who acts as a director, even if not formally appointed, or any person who has control over the company's affairs. This can encompass shadow directors or individuals who are paid as directors but do not hold the formal title. If you are a shareholder or have significant influence over a close company's operations and financial decisions, these new rules are highly likely to apply to you.

It is estimated that around 900,000 directors will be directly impacted by these changes, signifying a significant expansion of HMRC's data collection and scrutiny efforts across the UK's small business landscape.

The New Disclosure Rules: What's Changing from April 2025?

The core of HMRC's new initiative is to demand more detailed, transparent information from close company directors. This enhanced level of disclosure will primarily impact how directors report their personal income and financial dealings with their company on the Self Assessment (SA100) tax return, particularly through its supplementary pages.

Detailed breakdown of dividend income, including dates and sources
Information on all shareholdings, including beneficial ownership
Comprehensive reporting of Director's Loan Account movements and balances
Disclosure of any benefits in kind received from the company
Clearer reporting of salary and expenses paid by the company

Detailed Breakdown of Dividend Income

Previously, directors typically reported their total gross dividend income in a single box on their Self Assessment return. From 6 April 2025, this will no longer suffice for close company directors. HMRC now requires a more granular breakdown of all dividend payments received from the close company. This includes:

The precise date each dividend payment was made.
The gross amount of each individual dividend payment.
The name of the company from which the dividend was received.
Potentially, the type of dividend (e.g., ordinary, interim, final).

This level of detail allows HMRC to cross-reference dividend payments with company accounts and identify any inconsistencies or undeclared income. It also helps to ensure that dividends are paid legally and are properly accounted for in the company's books.

Worked Example: Dividend Reporting for 2025/26. A director, Mr. John Smith, owns 100% of SmithCo Ltd, a close company. In the 2025/26 tax year, he received the following dividends:

Date Paid	Gross Amount	Company Name
15 June 2025	£10,000	SmithCo Ltd
10 September 2025	£8,000	SmithCo Ltd
5 March 2026	£12,000	SmithCo Ltd

Instead of just reporting a total of £30,000, Mr. Smith will now need to separately list each of these dividend payments on his Self Assessment return for the 2025/26 tax year, providing the date and amount for each.

Information on All Shareholdings

HMRC will also require more comprehensive information regarding a director's shareholdings in close companies. This is not just about the percentage of shares held, but potentially includes:

The total number of shares held.
The class of shares (e.g., ordinary, preference).
Changes in shareholding during the tax year (acquisitions, disposals).
Confirmation of beneficial ownership, especially if shares are held through nominees or trusts.

This requirement aims to clarify the ownership structure of close companies and identify any arrangements that might be used to reduce tax liabilities, such as transferring shares to lower-rate taxpayers or holding shares in complex structures. It complements the dividend reporting by providing a full picture of the director's financial interest and control over the company.

Comprehensive Reporting of Director's Loan Account (DLA) Movements

The Director's Loan Account is a common feature in close companies, used to record money owed by the company to a director, or by a director to the company. HMRC has long scrutinised DLAs, but the new rules demand even greater transparency. Directors will need to provide detailed reporting of:

The opening balance of the DLA at the start of the tax year.
All amounts advanced to the director by the company (loans taken).
All repayments made by the director to the company.
Any interest charged on loans to or from the company.
Any amounts written off from the DLA.
The closing balance of the DLA at the end of the tax year.

This increased detail is critical because DLA transactions can have significant tax implications. For example, if a director's loan account is overdrawn (director owes money to the company) and remains so for more than nine months and one day after the company's year-end, the company may be liable for Section 455 tax (currently 33.75% of the outstanding loan for loans made in accounting periods ending after 5 April 2022). Furthermore, if a loan is written off, it can be treated as income for the director and subject to income tax and National Insurance Contributions.

Worked Example: Director's Loan Account Reporting for 2025/26. Ms. Emily White is a director of White Solutions Ltd. Her DLA movements for the 2025/26 tax year were:

Date	Transaction	Amount	Balance (Owed by Director)
06 April 2025	Opening Balance	N/A	£2,000
15 May 2025	Cash advance from company	£5,000	£7,000
20 August 2025	Repayment to company	(£3,000)	£4,000
01 February 2026	Company pays personal bill	£1,500	£5,500
05 April 2026	Closing Balance	N/A	£5,500

Ms. White will need to report this entire sequence of transactions, including the opening and closing balances, on her 2025/26 Self Assessment return. If the company's year-end is 31 March 2026, the £5,500 outstanding balance would be subject to Section 455 tax if not repaid by 1 January 2027.

Benefits in Kind (BiKs) and Director's Salary

While not strictly new disclosure areas, the increased scrutiny on close company director finances means that reporting of Benefits in Kind (BiKs) and director salaries must be impeccably accurate.

Benefits in Kind: Any non-cash benefits provided by the company to the director or their family members, such as company cars, private medical insurance, or interest-free loans, must be reported on a P11D form by the company. These benefits are then subject to personal income tax for the director and potentially National Insurance Contributions for the company. The new rules imply that HMRC will be more vigilant in cross-referencing these benefits with the director's overall financial picture.
Director's Salary and Expenses: Standard reporting of salary via PAYE remains unchanged, but the clear delineation between legitimate business expenses and personal drawings from the company will be under sharper focus. Directors should ensure all expenses claimed are wholly and exclusively for business purposes.

The overarching theme of these new rules is transparency. HMRC wants a complete and verifiable picture of all financial interactions between a close company and its directors to ensure that all taxable income, whether from dividends, loan account movements, or benefits, is correctly declared and taxed.

Impact on Self Assessment (SA100) Forms and Supplementary Pages

The new disclosure rules will necessitate changes in how directors complete their primary Self Assessment tax return, the SA100, and its various supplementary pages. While HMRC has not yet released specific new boxes or forms for the 2025/2026 tax year, the requirement for "more detailed information" strongly suggests that existing sections will require greater elaboration or new guidance will be issued for enhanced reporting.

The SA100 Main Tax Return

The main SA100 form summarises all income, gains, and allowances. Directors typically report their overall income from employment, dividends, property, and other sources here. The new rules mean that the figures entered on the SA100, particularly for dividends and potentially other income from the close company, must be backed by more granular detail on the relevant supplementary pages. This means the summary figures must be precisely derivable from the detailed breakdowns.

Key Supplementary Pages Affected

Several supplementary pages are likely to be directly impacted by the enhanced disclosure requirements:

SA102 (Employment): While primarily for PAYE income, directors' salaries are reported here. The new focus on money flows might indirectly lead to more scrutiny on the legitimacy of salary vs. dividends or DLA drawings. Any taxable benefits in kind (BiKs) reported on a P11D will also feed into this section.
SA102M (Ministerial and other payments): Less common, but relevant for certain types of directors.
SA105 (UK Property): Particularly relevant for directors of small property companies. While this page reports property rental income and expenses, the new rules might indirectly lead to more questions about how personal funds or company funds are used for property acquisitions, renovations, or maintenance, especially if DLA movements are involved.
SA108 (Capital Gains Summary): If directors have sold shares in their close company, or if assets transferred from the company to the director are treated as a disposal, this page would be relevant. The enhanced reporting on shareholdings will provide HMRC with a clearer basis for checking capital gains calculations.
New or Expanded Sections: It is highly probable that existing boxes on supplementary pages related to dividends and other company distributions will be expanded, or new boxes introduced, to capture the required date and source specific information. For Director's Loan Accounts, a dedicated section for detailed movements might be established, or existing "other income" sections will require a more comprehensive narrative.

How Dividends are Currently Reported vs. Future Requirements

Currently, dividends from UK companies are generally reported on the SA100 or potentially an SA102 (if from an employer-company). The total gross amount is typically entered. With the new rules, directors of close companies will likely need to list each dividend payment individually, specifying the date and the exact amount received from their particular close company. This moves from a summary figure to an itemised list, enabling HMRC to pinpoint specific transactions.

How Loans to/from the Company are Currently Reported vs. Future Requirements

Director's Loan Account movements are currently not explicitly detailed on the SA100 unless they result in taxable income (e.g., a beneficial loan, or a loan write-off). The new rules signal a shift towards requiring a full reconciliation of the DLA, including opening and closing balances, and a chronological listing of all significant advances and repayments. This will allow HMRC to track the flow of funds and identify any undeclared income or potential tax avoidance arrangements linked to the DLA.

Directors should anticipate that HMRC's online Self Assessment portal and paper forms will be updated to reflect these new requirements for the 2025/2026 tax year. It is crucial to monitor HMRC guidance and ensure that accounting software is capable of generating the necessary detailed reports.

Why HMRC is Making These Changes

HMRC's decision to implement these enhanced disclosure rules is driven by several strategic objectives, all aimed at improving the integrity of the tax system and ensuring fair contribution from all taxpayers.

Combating Tax Avoidance and Evasion

One of the primary motivations for these changes is to tackle tax avoidance and evasion. Close companies, by their nature of being tightly controlled, can sometimes be used to obscure the true nature of financial transactions. For example:

Disguised Remuneration: Directors might receive funds from their company not explicitly as salary or dividends, but through complex loan arrangements or other means that aim to reduce their personal tax liability.
Undeclared Income: Funds drawn from a company might not be correctly categorised, leading to under-declaration of income or capital gains.
Property Income Manipulation: For property companies, there can be opportunities to structure income or expenses in ways that reduce tax, which HMRC seeks to bring into sharper focus.

By requiring detailed disclosures, HMRC can better identify patterns that suggest non-compliance, enabling them to initiate targeted investigations and recover unpaid tax.

Improving Data Accuracy and Visibility

HMRC relies heavily on accurate data to assess tax liabilities and allocate resources effectively. The current level of detail for some transactions, such as summarised dividend income, provides limited insight. The new rules will generate a richer dataset, allowing HMRC to:

Cross-reference More Effectively: Link specific personal Self Assessment entries with company accounts, Corporation Tax returns, and P11D submissions.
Identify Discrepancies: Easily spot inconsistencies between what a director declares personally and what the company's records show.
Build a Comprehensive Financial Picture: Develop a clearer understanding of how funds flow between close companies and their directors, enhancing their analytical capabilities.

Addressing Perceived Abuses in Close Company Structures

Close companies offer legitimate tax planning opportunities, but they also present avenues for perceived abuses. HMRC's announcement specifically mentioning "small property companies" indicates a particular concern in this sector, where directors might use company structures to manage personal property portfolios in a tax-advantageous manner that HMRC deems inappropriate or non-compliant. The increased visibility aims to ensure that such arrangements are transparent and adhere to tax legislation.

Ultimately, these changes are part of HMRC's broader strategy to enhance compliance, streamline enforcement, and ensure that the tax system operates fairly for all. For directors, this means a greater burden of proof and an absolute necessity for meticulous record keeping.

Preparing for the Changes: Essential Steps for Directors

The effective date of 6 April 2025 gives directors some time to prepare, but proactive measures are essential to ensure a smooth transition and full compliance. Waiting until the last minute could lead to significant challenges in compiling the required detailed information.

Meticulous Record Keeping

This is arguably the most critical step. The new rules demand granularity, which can only be achieved with precise and organised records. Directors should focus on:

Dividend Vouchers: Ensure every dividend payment is accompanied by a properly issued dividend voucher, detailing the date, gross amount, company name, and director's name. These should be stored systematically.
Bank Statements: Reconcile all company and personal bank statements to track the flow of funds, particularly those related to Director's Loan Accounts.
Director's Loan Account Ledger: Maintain a detailed, up-to-date ledger for the DLA, recording every single transaction: advances, repayments, interest, and any write-offs. Each entry should include a date, description, and amount.
Share Register: Keep the company's share register accurate and current, reflecting any changes in share ownership during the year.
Board Minutes: Ensure that all dividend declarations and significant DLA transactions are properly minuted in board meetings.

Table: Essential Records for Enhanced Disclosure

Record Type	Purpose	Key Details to Retain
Dividend Vouchers	Proof of dividend payments, amounts, and dates.	Date, Gross Amount, Company Name, Director Name.
Director's Loan Account Ledger	Detailed history of all DLA transactions.	Date, Description (advance/repayment), Amount, Running Balance.
Company Bank Statements	Verification of all money movements.	Transaction dates, amounts, payees/payers, references.
Company Share Register	Proof of share ownership and changes.	Shareholder names, number of shares, class, dates of acquisition/disposal.
Board Meeting Minutes	Formal authorisation of key financial decisions.	Dates, attendees, resolutions for dividends, loans, etc.

Leveraging Accounting Software

Modern accounting software, such as AccountsOS, is an invaluable tool for managing these new requirements. Robust software can:

Automate Data Entry: Link directly to bank accounts to pull in transactions, reducing manual errors.
Categorise Transactions: Accurately categorise income and expenses, including specific tracking for dividends and DLA movements.
Generate Detailed Reports: Produce comprehensive reports that itemise dividends by date and amount, show full DLA ledgers, and provide a clear audit trail for all financial interactions.
Facilitate Compliance: Help prepare the necessary data for your Self Assessment return in a format that aligns with HMRC's new demands.

Seeking Professional Advice

Given the increased complexity and potential for penalties, consulting with a qualified accountant or tax advisor is highly recommended. They can:

Interpret Specific Situations: Provide tailored advice on how the new rules apply to your unique company structure and financial arrangements.
Ensure Compliance: Help you correctly categorise transactions and complete your Self Assessment return accurately.
Identify Risks: Highlight any areas of your current financial practices that might attract HMRC scrutiny under the new regime.
Optimise Tax Planning: Advise on legitimate tax planning strategies within the bounds of the new transparency requirements.

Reviewing Company Structure and Practices

The new rules might prompt some directors to review their company's financial practices and even its structure. For example:

DLA Management: If your DLA is frequently overdrawn or used as a personal bank account, it may be time to regularise repayments or consider alternative, more formal remuneration strategies.
Dividend Policy: Ensure dividends are declared and paid correctly, with sufficient distributable profits.
Property Holdings: For property companies, reassess how personal vs. company funds are used for property-related transactions.

These proactive steps will not only ensure compliance with the new HMRC disclosure rules but also foster better financial governance and reduce the risk of future tax inquiries.

Self Assessment Deadlines and Penalties for Non-Compliance

Understanding and adhering to Self Assessment deadlines is always critical, but with the new disclosure rules, the consequences of late or inaccurate filing become even more pronounced. The 2025/2026 tax year's return will be due in 2026.

Key Self Assessment Deadlines for 2025/2026 Tax Year

The standard Self Assessment deadlines remain in place, but directors must remember that the enhanced information must be ready well in advance of these dates to allow for preparation and submission.

Type	Deadline
Paper return	31 October following the tax year end
Online return	31 January following the tax year end
Tax payment	31 January following the tax year end (and 31 July for payments on account)

Example: For the tax year ending 5 April 2026:

Paper return due: 31 October 2026
Online return and tax payment due: 31 January 2027

Penalties for Late Filing and Inaccurate Returns

HMRC imposes penalties for both late submission of Self Assessment returns and for late payment of tax. Critically, there are also penalties for inaccurate returns, which will be particularly relevant given the new disclosure requirements.

Scenario	Penalty
1 day late (online filing)	£100
3 months late	Additional £10 per day for up to 90 days (£900 max)
6 months late	Additional 5% of tax due or £300 (whichever is greater)
12 months late	Additional 5% of tax due or £300 (whichever is greater, potentially up to 100% of tax due for deliberate withholding)
Late payment	5% of the tax unpaid after 30 days, another 5% after 6 months, and a final 5% after 12 months

Inaccuracy Penalties: If an error in your return leads to an underpayment of tax, HMRC can charge a penalty. The penalty amount depends on whether the inaccuracy was careless, deliberate but not concealed, or deliberate and concealed. Penalties can range from 0% (for unprompted, careful disclosure) up to 100% of the additional tax due. With the increased detail required, any omission or misrepresentation of dividends, shareholdings, or DLA movements could fall under these penalty rules.

The increased focus on transparency means HMRC will have more data points to cross-reference and identify potential inaccuracies. Directors must ensure their records are impeccable and their returns are completed with the utmost care to avoid these escalating penalties.

The new disclosure rules for close company directors do not exist in isolation. They are part of a broader tax landscape and interact with other regulations that directors must be aware of.

Corporation Tax Implications

While the new rules directly impact the director's personal Self Assessment, the information required for these disclosures originates from the company's financial records. Therefore, accurate Corporation Tax (CT600) filings and underlying accounting are more critical than ever.

Dividend Records: The company's accounts must accurately reflect all dividends declared and paid, matching the director's personal declarations.
Director's Loan Account: The company's balance sheet must show the correct DLA balance. Any Section 455 tax due on overdrawn DLAs must be correctly calculated and paid by the company.
Benefits in Kind: P11D submissions by the company must be accurate and consistent with any benefits received by the director.

Discrepancies between company filings and personal Self Assessment returns will be a significant red flag for HMRC, potentially triggering inquiries for both the company and the director.

Making Tax Digital for Income Tax Self Assessment (MTD ITSA)

Another significant change on the horizon for many directors is Making Tax Digital for Income Tax Self Assessment (MTD ITSA). While the new disclosure rules are distinct, they will overlap for directors who meet the MTD ITSA thresholds.

Timeline: MTD ITSA will apply to self-employed individuals and landlords with business or property income over £50,000 from April 2026. From April 2027, this threshold will drop to £30,000. Many close company directors will also have self-employment or property income that places them within these thresholds.
Digital Record Keeping: MTD ITSA mandates digital record keeping and quarterly updates to HMRC. This aligns perfectly with the need for meticulous digital records for the new disclosure rules. If you are subject to MTD ITSA, your digital accounting system will be the primary source for the detailed information required for your Self Assessment.
Software Compatibility: Using MTD-compatible software will become essential not just for quarterly submissions but also for compiling the enhanced annual Self Assessment information. AccountsOS is designed to meet these digital record-keeping demands.

For directors falling under both sets of rules, the need for integrated, digital accounting solutions is paramount.

Inheritance Tax and Capital Gains Tax

The increased scrutiny on shareholdings can have wider implications, particularly for Inheritance Tax (IHT) and Capital Gains Tax (CGT).

Share Transfers: Any transfer of shares between directors or to family members could have IHT implications, especially if the shares are not fully valued or if Business Property Relief is claimed. The detailed shareholding information will allow HMRC to scrutinise such transfers more closely.
Share Disposals: If a director sells their shares, the capital gain or loss must be accurately calculated and reported for CGT purposes. The enhanced transparency on shareholdings will help HMRC verify the base cost and disposal proceeds.

IR35 and Off-Payroll Working Rules

Many close company directors operate through personal service companies, which can be affected by the IR35 (off-payroll working) rules. While not directly targeted by these disclosure rules, the overall push for transparency means that HMRC will have a more comprehensive view of a director's income streams. This could indirectly aid HMRC in identifying cases where IR35 rules might be misapplied, especially if the director's remuneration structure appears to be primarily driven by dividends rather than salary for services rendered.

In essence, these new disclosure rules are a piece of a larger puzzle for HMRC. They fit into a strategy of greater data integration, enhanced scrutiny, and a proactive approach to ensuring tax compliance across all forms of business structures, particularly those where personal and company finances are closely intertwined. Directors must therefore adopt a holistic view of their tax obligations.

How AccountsOS Helps Close Company Directors

AccountsOS is designed to simplify compliance with HMRC's new disclosure rules, providing the tools you need for meticulous record keeping and accurate Self Assessment reporting.

Enhanced Record Keeping

Automatically categorize and store all transactions, making it easy to retrieve detailed dividend and DLA information for HMRC.

Dividend Tracking

Monitor all dividend distributions, including dates, amounts, and recipients, ensuring accurate reporting on Self Assessment.

Director's Loan Account Management

Track all movements in your DLA, providing clear balances and transaction histories required for the new disclosure rules.

Self Assessment Data Preparation

Generate comprehensive reports that consolidate all necessary income and expenditure data for your annual Self Assessment filing.

Frequently asked questions

When do these new disclosure rules take effect?

The new disclosure rules for close company directors are effective from 6 April 2025. This means they will apply to the 2025/2026 tax year, with the enhanced information required on Self Assessment returns filed in 2026.

Who is affected by these changes?

These rules primarily affect directors of small property companies and other close companies in the UK. HMRC estimates around 900,000 directors will need to provide more detailed information on their Self Assessment returns.

What constitutes a 'close company'?

A close company is generally one controlled by five or fewer 'participators' or by its directors. Participators include shareholders, loan creditors, or their associates, meaning family members or business partners.

Will I need to provide more detail on my dividends?

Yes, directors will need to provide more granular information on dividend payments. This includes the exact dates dividends were paid, the gross amount received, and the specific company from which the dividends originated.

How do Directors' Loan Accounts fit into this?

HMRC is seeking greater transparency on how money flows between directors and their companies. This means detailed reporting of all transactions on a Director's Loan Account, including loans taken, repayments made, and any interest charged or written off.

What if I don't comply with the new rules?

Non-compliance can lead to penalties for inaccurate or incomplete Self Assessment returns. HMRC's increased scrutiny aims to identify discrepancies, and failure to provide the required detailed information could result in inquiries and fines.

Does this affect my company's Corporation Tax return?

While these new rules directly impact the director's personal Self Assessment, the information required will often mirror data from the company's records. Accurate company accounting, which forms the basis for Corporation Tax, is crucial for seamless personal tax reporting.

How can AccountsOS help me prepare for these changes?

AccountsOS provides robust features for meticulous record keeping, tracking dividend distributions, and managing Director's Loan Accounts. Our platform helps ensure you have all the necessary detailed information readily available for your enhanced Self Assessment reporting.