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Taxing time for Surrey company directors over dividends reporting requirements
13th November 2025
New mandatory Self-Assessment reporting requirements means onus on directors to ensure proper documentation
Company directors and shareholders in Surrey face new mandatory reporting requirements for the first time when it comes to declaring dividends from profits for owner-managed and family-run ‘close’ companies.
Close companies are usually privately owned limited companies controlled by five or fewer participants, including shareholder directors.
The reporting for the compliance ruling by HMRC starts in the next financial year – 2025-26.
In their 25/26 Self-Assessment returns, and onwards, shareholders must report the following details for each company in which they hold shares:
- Name and company registration number
- Amount of dividend income received
- Percentage of share capital held
Tracy Underwood, a partner and private client tax specialist at Azets, the UK top 10 accountancy and business advisory firm, said: “These changes are part of the government’s broader strategy to reduce the tax gap.
“Enhanced dividend reporting for privately owned companies will give HMRC better visibility over dividend income, helping them identify unpaid or underpaid tax more effectively.
“These new mandatory reporting requirements mean that company directors should ensure accuracy with documenting dividends, which are outside of PAYE, as HMRC may want to take a closer look.”
Tracy added: “To ensure compliance with the new requirements, we recommend that all dividends paid are properly documented in a contemporaneous manner, including board minutes voting the dividends and confirming adequate distributable reserves, followed by the issue of dividend vouchers.
“Directors should keep accurate records of board decisions, as meeting minutes are crucial evidence of compliance with their duties. It might also be wise to review the shareholding structure early, to avoid last-minute complications when completing the tax return.
“It is essential to maintain accurate and up-to-date shareholder records and dividend histories – some businesses will be lagging somewhat in this regard and may well require support from accountants to avoid falling foul of the new reporting landscape.”
Azets has Surrey offices in Guildford and Sutton and also at Heathrow.
Dividends are paid to shareholders if there are sufficient profits to warrant pay-outs – the first £500 in 2024-25 is tax-free, reduced from the tax-free allowance of £1,000 in 2023-24 and £2,000 in the 2022-23.
The current basic dividend rate above the allowance is 8.75%, with the higher rate at 33.75% and the additional rate at 39.35%.
Dividends are not business costs and are therefore deducted from the balance sheet [savings and liabilities], not the ‘dashboard’ profit & loss sheet which summarises a company’s in-and-out costs.
Example: A salaried company director of a small engineering firm earning £70,000 per annum and paid through PAYE (only income source), takes a dividend of £6,000 following a profitable financial year. The director would be taxed £1,856 on the dividends after tax calculations.
