Tax return changes for directors of close companies: What’s new and what’s next

HMRC has tightened the rules on what directors of close companies must disclose on their self‑assessment tax returns, with mandatory new boxes appearing on the 2025/26 SA102 (Employment) pages.

A further, much broader consultation on close company reporting closed in June 2026, signalling that this is only the first step in a more connected approach by HMRC. Owner‑managed business directors and their advisers should understand what now applies, where the practical pitfalls lie, and what is likely to follow.

What has changed on the self‑assessment return?

HMRC has updated the SA102 (Employment) pages to include four new boxes which must be completed for each close company directorship:

• Box 7.1 — name of the close company;
• Box 7.2 — company registration number;
• Box 7.3 — dividends received from that close company (reported separately from other dividend income);
• Box 7.4 — highest percentage of share capital held during the tax year (calculated by reference to nominal value of the shares).

Previously, taxpayers could simply tick boxes 6 and 7 of the SA102 to confirm they were a director and that the company was close; supplying the underlying detail was optional. From 2025/26 the detail is mandatory, and HMRC indicates that the SA102 will now generally need to be completed even where the director has received no salary or benefits in kind from the company.

Which companies and directors are affected?

A company is “close” broadly where it is controlled by five or fewer participators, or by any number of participators who are also directors. A company is also close if more than half of its assets on a winding‑up would go to that small group.

A participator is widely defined to include shareholders, persons entitled to share capital or voting rights, loan creditors (other than ordinary commercial lenders), and anyone entitled to distributions or company assets. In practice, this captures the vast majority of UK family‑owned and owner‑managed companies, including most contractor, professional services and property holding structures.

Why has HMRC introduced these changes?

The changes form part of HMRC’s broader compliance strategy aimed squarely at owner‑managed companies. Small businesses are estimated to account for around 60% of the overall tax gap, and HMRC has stated that the UK tax gap exceeds £45 billion.

Three drivers stand out:

1. Closing a long‑standing visibility gap. Until now, dividend income on personal returns was reported as a single aggregate figure. HMRC could not easily identify how much came from a director’s own close company.
2. Data matching through HMRC’s Connect system. Linking SA102 disclosures to the Companies House register and corporate tax filings lets HMRC cross‑reference dividend payments, ownership percentages and corporate accounts to identify anomalies.
3. Anti‑avoidance. HMRC believes that the concentration of control in close companies can blur the boundary between the company’s money and the participators’ money, increasing the risk of both error and deliberate non‑compliance.

Penalties and practical pitfalls

A new fixed penalty has been introduced specifically to enforce the information requirements: £60 per failure to provide the required information.

Because the disclosures do not directly affect a director’s tax liability, HMRC has had to create a bespoke penalty outside the standard inaccuracy regime. Importantly, leaving a box blank is not the same as entering zero, a blank box may be treated as missing information and trigger the penalty, even where the underlying figure is genuinely nil.

Several practical issues have been flagged by the ICAEW and ATT:

• Multiple directorships — a separate SA102 page is needed for each close company directorship; some tax return software currently limits the number of SA102 pages that can be submitted.
• Multiple share classes — calculating percentage shareholding by reference to nominal value can be awkward where there are alphabet shares, growth shares or preference shares with different rights.
• Directors who are not shareholders — software has reportedly rejected returns where Box 7.4 cannot accept a “nil” entry.
• Unpaid directors and dormant companies — HMRC’s guidance is still developing on whether the SA102 must be completed for nil‑income or dormant directorships, although the safer course is generally to disclose.

How Gerald Edelman can help

The new disclosure rules are a clear signal that HMRC will continue to bring corporate and personal compliance closer together. Acting now, by reviewing your director records, dividend documentation and share structures, will help you avoid unnecessary penalties and put you in a strong position should the further reporting obligations on close companies themselves come into force.

If you would like to discuss how these changes affect you, your fellow directors or your business, our Tax team at Gerald Edelman would be pleased to help. We can review your current arrangements, ensure your 2025/26 self‑assessment return is complete and accurate, and help you plan ahead for the next phase of HMRC’s close company reporting reforms.

Please get in touch with your usual Gerald Edelman contact, email tax@geraldedelman.com.