2025/26 Tax Year changes for Directors

2025/26 Tax Year changes for Directors

From the 2025/26 tax year onwards, directors will be required to provide additional information in their tax returns.

At first glance, the additional information requirements may seem like a small administrative update, however in practice they raise a number of practical questions.

From 2025/26, directors will be required to provide additional information in their tax returns, which will include confirming the following:

• Whether they were a director during the tax year (box 6) and,
• If so, whether the company is a close company (box 7)

Although these boxes have historically been included in the tax return, they were not mandatory.

Where an individual is a director of more than one company, a separate page must be completed for each directorship. Where the company is a close company (usually less than 5 directors), the reporting goes further.

Therefore, from the 2025/26 tax year, directors will need to provide:

• The company’s name
• The company’s registration number
• The dividend received from that company even if the amount is zero, and
• The total percentage of the share capital held in the company, even if the percentage held is zero.

These additional requirements are new and are likely to be where most uncertainty arises.

It is, however, worth emphasising that these changes do not mean all directors are now required to file a tax return.

For a number of years, HMRC have not expected every company director to submit a self-assessment tax return. Whether a return is required depends on the individual’s circumstances.

That position remains unchanged. The new requirements simply mean that where a return is already required, whether under traditional self-assessment or Making Tax Digital for Income Tax, the additional information must be provided.

Of all the new requirements, the need to report a percentage shareholding is likely to generate the most questions.

HMRC’s employment notes for 2025/26 state that the percentage should be calculated by reference to the nominal value of shares owned. While this is straightforward where there is only a single class of shares, it can become more complex in practice.

For example, where a company has only one class of shares, the calculation is intuitive. If a director holds half of the issued shares, their shareholding is 50%.

However, many companies, particularly owner-managed businesses, have more complicated share structures. Different classes of shares may exist, often with different nominal values. In these cases, the calculation must take into account the total nominal value across all shares, rather than simply the number of shares owned.

This can produce results that are not immediately obvious. A shareholder with a relatively small number of higher nominal-value shares may hold a larger proportion of the company than someone with a greater number of lower nominal-value shares.

It is also worth noting that the relevant legislation refers to share capital “held”, for which Clarification has been requested from HMRC to confirm how this should be interpreted as the percentage owned.

A further point that may catch some off guard is the ‘scope of shares’ that must be included in the calculation.

The legislation refers to share capital, rather than “ordinary share capital.”

In other areas of tax, “ordinary share capital” excludes certain shares, such as those carrying only a fixed dividend and no further rights to profits.

Another consideration is that Shareholdings are not always static. Directors may acquire or dispose of shares during the course of a tax year, which raises the question of what percentage should be reported.

HMRC’s stance for 2025/26 is that the percentage should be the highest percentage “owned” at any point during the tax year.

This simplifies the reporting requirement but may produce a figure that does not reflect the position at the end of the year.

For example, if the director’s percentage shareholding decreases from 60% to 50% during the tax year, the director should report 60%, being the highest percentage owned.

Another important practical point is that the boxes must be completed even where the relevant figure is zero.

If a director of a close company:

• Does not own any shares; and/or
• Did not receive any dividends during the year

they are still required to enter zero in the relevant boxes.

Leaving these boxes blank is not the same as entering zero. An omission may be treated as a failure to provide the required information, which could result in a penalty.

The legislation provides for a penalty of £60 where the required information is not provided.

At present, it is not entirely clear how HMRC will apply this in practice. For example, it is uncertain whether penalties will be charged:

• Per tax return;
• Per directorship; or
• Per missing item of information

Although further clarification is expected, directors are advised to ensure all required fields are completed in full.

While the additional information requirements are not complex in principle, they do give rise to a number of practical questions, particularly in relation to percentage share capital calculations.

For many directors, the key practical steps will be:

• Identifying all directorships held during the tax year
• Confirming whether each company is a close company
• Ensuring shareholding percentages are calculated correctly
• Completing all required boxes, even where the answer is zero

Taking the time to gather this information in advance should help to avoid last-minute uncertainty and reduce the risk of penalties.

If you are unsure or have any questions, please contact us here at Kennedys Accounting – our experienced team will be please to help.