Close company dividend reporting rules 2025/26 — what contractor directors must now disclose
Direct Answer
From April 2026, directors of close companies must include new disclosures in their 2025/26 Self Assessment return: company name, Company Registration Number (CRN), total dividend amount, and percentage shareholding — for every close company from which they received dividends. Nearly all contractor limited companies are close companies. A £60 fixed penalty applies for each missing piece of information. If you are an Autobooks subscriber, this is handled for you.
What has changed and when does it apply?
The new close company dividend disclosure requirements apply to 2025/26 Self Assessment returns — that is, returns covering the tax year 6 April 2025 to 5 April 2026, filed from April 2026 onwards.
Previously, reporting dividends on a Self Assessment return meant entering a total dividend figure in the relevant box. That was broadly it. From 2025/26, HMRC requires a breakdown per company. For each close company you received dividends from, you must now provide:
- The company name
- The Company Registration Number (CRN)
- The dividend amount received from that company
- Your percentage shareholding in that company
This is an additional administrative step — not a change to how dividends are taxed. The dividend tax rates for 2025/26 remain: 8.75% (basic rate), 33.75% (higher rate), 39.35% (additional rate), with a £500 dividend allowance.
Does my company count as a close company?
Almost certainly yes — if you run a contractor limited company, it is almost certainly a close company.
The legal definition: a company is close if it is controlled by its directors, or by five or fewer participators (shareholders). Given that most contractor PSCs have one director who also holds 100% of the shares — or two directors who share the shares between them — the close company threshold is easily met.
There are two exceptions worth knowing:
- Quoted companies: companies listed on a recognised stock exchange are not treated as close companies under these rules, so dividends from publicly traded shares (e.g. your ISA or a shareholding in a FTSE 100 company) do not require this disclosure.
- Non-close corporate groups: dividends from subsidiaries of non-close parent companies are also excluded.
For the vast majority of contractors taking dividends from their own limited company, the new disclosure applies.
Why HMRC introduced this — income-shifting
HMRC's stated aim is improved visibility of income-shifting arrangements between spouses and family members.
Income shifting works like this: a contractor's spouse holds shares in the limited company, receives dividends, and uses their own basic rate band and personal allowance to pay less tax on that income than if the contractor had taken it all themselves. This is legal — but HMRC wants to see it clearly on the return.
By requiring per-company disclosure of dividend amounts and shareholding percentages, HMRC can cross-reference: if a spouse holds 40% of the shares but receives 90% of the dividends, that is the kind of discrepancy HMRC wants to be able to spot. Alphabet shares — where different share classes carry different rights — are a common structure used for this purpose.
ICAS and other accountancy bodies have flagged the additional administrative burden these rules place on small practice clients. For solo contractors with a straightforward structure, it is a minor inconvenience. For those with more complex arrangements, it requires careful record-keeping throughout the year.
Alphabet shares — why they create extra complexity
Many contractor companies — particularly those set up with spouses as co-shareholders — use alphabet shares: multiple classes of shares (A shares, B shares, sometimes C shares) where each class can carry different dividend rights.
The flexibility this creates is real: you can pay different dividend amounts per class in any given year, depending on each shareholder's tax position. But under the new rules, each share class must be tracked and reported separately.
That means knowing, for each dividend payment:
- Which share class it was paid on
- How much was paid per share
- Who holds what percentage of that class
If your company has alphabet shares and you have not been keeping board minutes and dividend vouchers for each payment, now is the time to fix that before the 2025/26 return is due. This is standard practice within the Autobooks service.
The £60 penalty — Finance Act 2024
Missing disclosure information is not a grey area. Finance Act 2024 introduced a £60 fixed penalty for each piece of required information that is absent from the return.
There are four required data points per close company (name, CRN, dividend amount, shareholding). If all four are missing for one company, that is potentially £240 in penalties — before any interest on incorrectly reported income.
The penalty is fixed, not percentage-based, which means it applies equally whether the dividend was £500 or £50,000. The practical lesson: make sure every required field is completed accurately. Part-completion is not a defence.
For context: the 2025/26 dividend allowance is only £500, so most contractors will be paying dividend tax anyway. The new disclosure requirements are on top of that — an administrative obligation, not a tax increase in themselves.
What Autobooks subscribers need to do
Nothing extra. All close company dividend disclosures are handled within the Autobooks service.
Throughout the year, we track your dividend payments — amounts, dates, share classes, and your shareholding — as part of standard bookkeeping. When it comes to completing your 2025/26 Self Assessment, the required disclosures are already there. You review and sign off; we file.
If you are not currently an Autobooks subscriber and are unsure whether your current records contain the information HMRC now requires, get in touch. We can do a straightforward review as part of an onboarding call.
If you are currently doing your own Self Assessment, check that your software captures CRN and shareholding percentage against each dividend entry — not all basic accounting tools do this automatically.
Let AutoBooks handle your 2025/26 Self Assessment — including the new close company dividend disclosures.
Everything tracked through the year. Nothing to chase at filing time.
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