New Director Tax Requirements Raise More Questions: What Company Directors Need to Know

Director Tax Requirements are changing from the 2025/26 tax year, introducing additional information that company directors may need to provide on their Self Assessment tax returns. Although the changes are designed to give HMRC more detailed information about directors, dividends and shareholdings, they have also created a number of practical questions for directors, accountants and tax advisers.

The new rules are particularly relevant to directors of owner-managed and family companies. Directors who already need to submit a Self Assessment return could find that information which was previously optional must now be provided. For directors of close companies, the requirements go considerably further.

Importantly, the new Director Tax Requirements do not automatically mean that every company director must register for Self Assessment. Instead, they change the information that needs to be provided where a director is already required to submit a tax return. Understanding this distinction will be important as the first returns affected by the new rules are prepared.

Director Tax Requirements are becoming increasingly important for company directors as HMRC introduces additional reporting obligations from the 2025/26 tax year. The new Director Tax Requirements mean that directors completing Self Assessment returns may need to provide more information about their directorships, while directors of close companies face additional disclosures relating to dividends and shareholdings. Understanding the Director Tax Requirements early will help directors prepare the correct records before filing their tax returns.

For owner-managed businesses in particular, the Director Tax Requirements could create additional administration. Many small limited companies are close companies, meaning their directors may need to disclose the company name, registration number, dividends received and their highest percentage shareholding during the tax year. These Director Tax Requirements make accurate company records, dividend documentation and shareholding information more important when preparing Self Assessment returns.

However, the new Director Tax Requirements have also raised questions about exactly how the rules operate in practice. Issues involving unpaid directorships, dormant companies, multiple directorships and changing shareholdings can make the Director Tax Requirements more complicated than they initially appear. Directors preparing for the 2025/26 Self Assessment cycle should therefore understand what information is required and ensure their personal tax return agrees with the underlying company records.

What are the new Director Tax Requirements?

The changes apply to Self Assessment tax returns for the 2025/26 tax year onwards. They originate from powers introduced by the Finance Act 2024, with the detailed requirements subsequently set out in The Income Tax (Additional Information to be included in Returns) Regulations 2025.

Previously, some information concerning directorships on the SA102 Employment supplementary pages was optional. Under the new Director Tax Requirements, directors completing a tax return will have additional mandatory reporting obligations.

Where an individual has been a director during the tax year, their tax return will need to identify their director status. Further information is required where the company concerned is a close company.

The changes are intended to improve the quality of information available to HMRC and make it easier for HMRC to compare the information declared personally by directors with information held about their companies.

This does not itself introduce a new tax charge. However, the increased transparency could make inconsistencies between company records, dividend documentation and directors’ personal tax returns easier for HMRC to identify.

What is a close company?

Understanding the meaning of a close company is important when considering the new rules.

A close company is broadly a UK-resident company controlled by five or fewer participators, or by any number of participators who are also directors. A participator will usually include a shareholder, although the tax rules can extend the definition further. Many small, family-run and owner-managed limited companies will therefore fall within the close company rules.

This is particularly relevant to the new Director Tax Requirements because directors of close companies may have additional information to report on their Self Assessment returns. This can include the company name and registration number, dividends received from the company and the director’s highest percentage shareholding during the tax year. Directors should therefore establish whether their company is a close company before completing their 2025/26 tax return.

Broadly, a close company is a UK-resident company controlled by five or fewer participators, or by any number of participators who are also directors. A participator will normally include a shareholder, although the statutory rules are more detailed.

Many typical owner-managed limited companies will therefore be close companies.

For example, a consultancy company owned and operated by one director-shareholder would normally be a close company. A family business owned by two spouses and their children could also fall within the definition.

This means the additional Director Tax Requirements are likely to affect a significant number of small and medium-sized owner-managed businesses.

What information will directors need to provide?

The 2025/26 SA102 Employment pages contain additional boxes relating to company directors.

Directors are required to indicate whether they were a director during the tax year and whether the company was a close company.

Where the individual was a director of a close company, additional information is required, including:

• the name of the close company;
• the company’s registered number;
• the amount of dividend income received from that close company during the tax year; and
• the highest percentage of the company’s ordinary share capital held by the director during the tax year.

These details may appear straightforward, but in practice there are situations where determining the correct information could require additional work.

For example, complications can arise where shareholdings changed during the year, a director holds different classes of shares, a company has several shareholders, or an individual is a director of several companies.

Director Tax Requirements and dividend reporting

One particularly important element of the new rules concerns dividends.

Directors of close companies who are required to file Self Assessment returns must disclose the dividends received from the relevant close company. This provides HMRC with more specific information about where an individual’s dividend income originated.

Previously, dividend income was generally reported as part of the individual’s overall UK dividend income. The additional reporting therefore gives HMRC another way to compare information concerning the director with the company’s accounts and records.

This makes accurate dividend administration increasingly important.

Companies should ensure that dividends have been properly authorised and supported by appropriate documentation. Dividend vouchers, board minutes, accounting records and the figures included in the director’s Self Assessment return should be consistent.

A payment described as a dividend should also genuinely meet the legal requirements for a dividend. Companies must have sufficient distributable reserves before dividends are declared.

The new Director Tax Requirements therefore provide another reason for owner-managed businesses to maintain good records throughout the year rather than attempting to reconstruct dividend information when the tax return is prepared.

How is the percentage shareholding calculated?

Another area attracting questions is the requirement to report the director’s highest percentage shareholding during the tax year.

The legislation refers to the highest percentage of the company’s share capital held by the individual during the year.

This may be relatively simple where a company has one class of ordinary shares and ownership remains unchanged throughout the year.

For example, if a company has 100 ordinary shares and a director owns 60 throughout the year, the highest percentage would normally be 60%.

The position can become more complicated where shares are transferred, issued or reorganised during the year.

A director who begins the year owning 80% but transfers shares and finishes the year with 50% would need to consider the highest percentage held during the relevant period rather than simply reporting the year-end position.

Companies with multiple share classes may require additional consideration when applying the rules.

Do the rules mean every director must file a tax return?

No. This is one of the most important points surrounding the Director Tax Requirements.

Being a company director does not, by itself, automatically mean an individual must submit a Self Assessment tax return.

The additional information requirements apply where the director is already required to make and deliver a tax return.

A director might need Self Assessment for a variety of reasons, including receiving untaxed income, having taxable dividends that need to be reported, property income, self-employment income, capital gains or other circumstances requiring a return.

Therefore, someone who is a director but has no separate requirement to submit Self Assessment does not appear to be brought into Self Assessment solely because of these additional reporting rules.

Directors should nevertheless check their individual circumstances rather than assuming that PAYE deductions from their salary mean no return is necessary.

What happens if you are a director but receive no salary?

This is one of the areas where the practical application of the new rules has generated discussion.

The legislation can require additional information from directors who are required to file a tax return even where they received no remuneration from a particular directorship.

The Association of Taxation Technicians (ATT) has highlighted an apparent inconsistency between the legislation and some of HMRC’s published tax return guidance.

HMRC has indicated to the ATT that a separate SA102 Employment page should be completed for each directorship where the reporting requirement applies, including situations where no income was received from that directorship.

This is particularly relevant to individuals who hold several directorships but only draw a salary from one company.

It demonstrates why the new Director Tax Requirements are not simply about declaring director salaries.

What about directors of dormant companies?

A dormant company can also create reporting considerations.

According to clarification obtained by the ATT from HMRC, the additional requirements can apply to directors of dormant companies where the individual is otherwise required to submit a Self Assessment tax return.

This could catch directors who may have forgotten about an old company that remains registered but no longer trades.

For example, an individual might operate their main business through one company while remaining a director of a second dormant company. If they are required to file Self Assessment, both directorships may need to be considered when preparing the return.

Directors should therefore maintain an up-to-date list of all appointments rather than reviewing only companies from which they received income.

Multiple companies could increase the administration

The Director Tax Requirements could become particularly burdensome for entrepreneurs and investors with several limited companies.

The ATT’s current guidance states that a separate SA102 Employment page should be completed for each directorship.

Consider a property investor who is a director of five separate property SPVs. Even where some companies paid no salary or dividends, each appointment may need to be reviewed when preparing the individual’s tax return.

The same issue could affect groups containing trading companies, property companies, investment companies and dormant entities.

Keeping accurate company numbers, shareholding records and dividend information in one place could therefore save significant time when Self Assessment returns are prepared.

Why is HMRC collecting more information?

The changes form part of a wider effort to improve the quality of information HMRC receives about businesses and individuals.

HMRC already receives substantial amounts of information from employers, companies and taxpayers. Additional reporting makes it easier to compare information across different records and identify potential discrepancies.

For example, HMRC may be able to compare dividends disclosed by a director against company accounts and other information available about the business.

The government has also been considering wider information requirements for close companies, indicating that increased reporting and greater data matching are likely to remain important features of the UK tax system.

For directors, this makes consistency between personal and company records increasingly important.

Practical steps for meeting the new Director Tax Requirements

Directors affected by the changes should prepare before completing their 2025/26 Self Assessment returns.

Start by identifying every company of which you were a director at any point during the tax year, including dormant companies and companies from which you received no salary.

For each company, establish whether it is a close company and record its exact registered name and Companies House registration number.

Directors of close companies should also review the dividends they actually received during the tax year and ensure these agree with dividend vouchers and company accounting records.

Shareholdings should be reviewed carefully, particularly where shares were issued, transferred or reorganised during the year. The requirement relates to the highest percentage held during the year, so relying only on the position at 5 April could produce an incorrect answer.

Where there are multiple share classes or more complicated ownership arrangements, professional advice may be appropriate.

What happens if the information is wrong?

Information included in a Self Assessment return should be complete and accurate to the best of the taxpayer’s knowledge.

Incorrect information could lead to HMRC enquiries and, depending on the circumstances, penalties may potentially arise where inaccuracies result in tax being understated.

Even where an error does not change the amount of tax payable, inconsistent information can generate unnecessary correspondence and additional professional costs.

Directors should therefore avoid treating the additional boxes as a minor administrative exercise.

Good bookkeeping, properly prepared dividend documentation and accurate statutory records will make complying with the new Director Tax Requirements considerably easier.

Final thoughts

The new Director Tax Requirements represent an important change for company directors completing Self Assessment returns from 2025/26 onwards. For directors of close companies, HMRC will receive more specific information about their companies, dividends and shareholdings than it previously obtained through the personal tax return.

However, questions remain around the practical application of some aspects of the rules. Professional bodies including the ATT and ICAEW have highlighted areas where further clarification has been needed, particularly around directorships where no remuneration is received and the interaction between the legislation and HMRC’s tax return guidance.

The key point is that directors should not wait until the Self Assessment deadline to gather the necessary information. Company details, dividend records, share transactions and dormant directorships should be reviewed well in advance.

The Director Tax Requirements do not create an automatic Self Assessment obligation simply because someone is a director, nor do they introduce a new tax charge. They do, however, increase the level of information HMRC can obtain from directors who are required to file.

Final thoughts

The new Director Tax Requirements represent a significant reporting change for company directors from the 2025/26 tax year. While the Director Tax Requirements do not automatically bring every director into Self Assessment, directors who are required to file a tax return may now have additional information to provide. For close company directors in particular, this includes important details about dividends, company information and shareholdings.

As HMRC receives more detailed information through the Director Tax Requirements, keeping accurate and consistent records becomes increasingly important. Dividend vouchers, statutory records, share transfers and accounting information should all support the figures reported on the director’s personal tax return. Directors with multiple companies, dormant companies or changing shareholdings should take particular care when considering the Director Tax Requirements.

With some practical questions still surrounding the application of the Director Tax Requirements, directors should prepare well before their Self Assessment deadline. Reviewing directorships, dividends and shareholdings early can help identify potential issues and reduce the risk of incorrect reporting. If you are unsure how the Director Tax Requirements affect you or your company, seeking professional tax advice can help ensure your 2025/26 return is completed accurately and in line with HMRC requirements.

For owner-managed companies, this makes accurate and consistent record keeping more important than ever. Directors who are unsure about their reporting obligations should seek professional advice before submitting their 2025/26 Self Assessment return.

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