HMRC tightens the screws, again…

Company Directors face tighter requirements - this article explains what the new tax return rules mean for you.

More than one in five (over 20 per cent) of landlords in the UK now operate at least part of their portfolio through a limited company and are themselves company directors. This reflects a steady, long-term shift toward incorporation, driven by tax changes, mainly the restriction of mortgage interest relief for individual landlords.

Since 6 April 2025, directors of small property companies face mandatory new disclosure requirements on their self-assessment returns. Hundreds of thousands of landlords are affected — and many are not yet aware of these new requirements.

If you hold residential or commercial property through a limited company, there is a reasonable chance you are already behind on your paperwork. This may not be because you have done anything wrong, but because HMRC changed the rules quietly last year, and most landlords have yet to catch up.

From 6 April 2025, the new obligations under The Income Tax (Additional Information to be included in Returns) Regulations 2025 came into force. They require directors of so-called “close companies” to include significantly more detail on their personal self-assessment tax returns.

The 2025–26 return — the first to be filed under the new regime — opens for submission in April 2026. According to HMRC’s own estimates, the measure will affect approximately 900,000 directors across the United Kingdom.

For landlords who have incorporated their buy-to-let portfolios or run small property development businesses, these changes are an immediate concern. They are mandatory and come with significant penalties for those who get it wrong.

This article applies primarily to England and is not a full interpretation of HMRC rules. Always seek professional advice before making or not making decisions. Use this guide as the starting point for your research, not an endpoint.

What is a close company?

The term “close company” is a legal definition which many landlords may not have come across before. Basically, a close company is a UK company that is under the control of five or less individuals.

That could mean, and does mean, a sole director-shareholder running a property investment company. It may be a couple who set up a limited company together to hold their property portfolio. It could equally be two or three business partners who are developing residential sites.

A Family Investment Company (FIC) is almost always a close company because FICs are controlled by a small number of people (usually family members) and are designed to hold investments rather than trade them actively. They are usually classified as "close investment holding companies," which means they are subject to the top rate of corporation tax (25% in 2026)

The definition includes most small and family-owned limited companies in the UK. If you and your spouse jointly own and direct a property company, you are almost certainly running a close company.

HMRC provides full guidance in its Company Taxation Manual, but in practice, if you have a handful of shareholders all known personally to each other, this close company label.

What has changed?

Until recently, the employment pages of the self-assessment tax return (form SA102) included optional questions asking whether the taxpayer was a company director and whether the company was a close company. These were voluntary and made little practical difference whether you answered them or not.

From the 2025–26 tax year however, answering these questions is compulsory. But the bigger change is the new information that directors of close companies must now provide. For each relevant company, in their personal tax return directors must supply:

The full name and the Companies House registration number of the close company.
The value of dividends received from that company during the tax year. These are dividends reported separately from any other UK dividend income, for example from shares held in publicly listed companies.
The percentage shareholding in the company during the tax year. If your holding changed during the year, it’s the highest percentage held at any point.

Before these changes directors were required to declare total dividend income, but they had no obligation to identify which company the dividends came from.

So, a landlord who owned shares in several companies, or who also held investments in listed shares or funds, simply added everything together. HMRC had no idea which individual company had paid out.

Now, under these new rules, from the 2025–26 return onwards, HMRC will cross-reference what a director declares with company corporation tax returns and accounts filed at Companies House.

Tightening the screw

HMRC has had a long-running concern about what it terms the “tax gap”. That’s the difference between the tax that should be collected and what it receives. All owner-managed businesses, including property companies, are a particular target.

Under the existing regime, HMRC’s visibility of loans and payments between a close company and its directors arises only when a tax charge is made. Typically, that would be when a director’s loan remained overdrawn beyond the permitted nine-month window.

Short of that, HMRC had little or no insight into how money flowed between small companies and their owners. These new disclosure requirements are designed to address that. They will give HMRC a routine annual check on dividend payments and ownership stakes across UK companies.

The changes come about because of long-standing discussions and a 2022 consultation exercise during a wider government review of the information collected from owner-managed businesses.

The regulations were published in 2025, but the information has been slow to come out and has not translated into wider awareness among landlords and directors.

The penalties

The penalties for failing to comply with these new rules fall outside the standard framework for income tax errors because they don’t alter a director’s income tax or capital gains tax liability. Consequently, this data is disclosure rather than a vital tax computation and the fixed penalty fine at £60 for each failure reflects that.

This may not seem a significant loss for failing to comply, but you should always bear in mind, a penalty notice from HMRC has a habit of leading to wider scrutiny. The sensible approach, however much you may object to HMRC prying into your affairs, is compliance with the letter of the rules.

Grey areas

The professional bodies representing accountants and tax advisers have been largely supportive of the greater transparency these rules will provide, but they have raised some practical concerns.

The most significant of these is the uncertainty around reporting companies with multiple classes of shares. Many small property companies are structured with different types of shares. These include ordinary shares and preference shares, or shares with different income rights for different family members.

Where these share classes carry different entitlements to income and capital, it is not yet clear how HMRC expects the percentage holding to be calculated and disclosed.

It matters for landlords who have used “family investment companies” as a structure for holding property and managing succession planning. These may involve complex share structures, so the standard question about percentage shareholding may not be all that straightforward.

According to ICAEW insights, HMRC has stated that the percentage shareholding should be calculated by the nominal value of the shares.

For example, if you hold 50 per cent of the nominal share capital but only 10 per cent of the dividend rights due to a different class, the reported percentage for this HMRC rule is likely the 50 per cent nominal value.

According to the Association of Taxation Technicians (ATT) reporting holdings with different voting or dividend rights remains complex, and detailed HMRC guidance is still expected.

Your record keeping is going to be crucial. You must maintain meticulous records of dividend vouchers, minutes of meetings approving dividends, and the share structure of your company, details that fully align with Companies House.

HMRC has indicated that further guidance is to be published but has yet to appear. Landlords with other than a simple share structure should not attempt to complete the new sections on the return without professional advice.

Director loan accounts

The new self-assessment disclosures are interrelated with directors’ loan accounts (DLAs).

The director’s loan account records money taken out of a limited company by its directors, not as a salary, a declared dividend, or a reimbursed expense. It is simply a loan from the company.

Landlords often use their company bank account quite informally, drawing funds as and when needed and dealing with the paperwork later. This is a practical process that involves a significant tax risk if the account remains overdrawn.

Section 455 of the Corporation Tax Act 2010, says that if a director’s loan account is still overdrawn nine months after the company’s financial year-end, the company is liable to a corporation tax charge on the outstanding balance.

The tax rate for this in 2025–26 is 33.75 per cent. From 6 April 2026, for loans made on or after that date, the rate rises to 35.75 per cent. This charge can be reclaimable once the loan is repaid, but the process can tie up company cash for a year or more.

HMRC intends to go further. It is currently consulting on proposals that would require close companies to report details of all transactions with their directors and shareholders. This includes the amount, the date, and the recipient details of every such transaction to be provided annually through the corporation tax return.

This latest consultation was launched in March 2026 and suggests that the direction of travel is towards ever greater disclosure. What is mandatory now on personal tax returns may be only a part of what HMRC is considering.

The dividend tax rise

As these new disclosure rules come in, comes a rise in dividend tax rates. From 6 April 2026, the ordinary rate of dividend tax increases from 8.75 per cent to 10.75 per cent, while the upper rate moves from 33.75 per cent to 35.75 per cent.

For landlords operating through limited companies, dividends may represent a substantial portion of their annual income. With all the other detailed requirements around the letting of property with the advent of the Renters’ Rights Act, these new rates and the more detailed mandatory reporting will add to the pressures.

Watch for further HMRC guidance particularly around share classes by monitoring the HMRC website and ask your accountant. Don’t file this information without professional advice if your affairs are complex.

Greater scrutiny all round for directors

For landlords who have incorporated their portfolios in recent years the era of low-visibility, minimal-disclosure in self-assessments is over. The new self-assessment rules, coupled with rising dividend tax rates, enhanced scrutiny of director loan accounts and the eventual company transaction reporting, all represent a sustained effort on HMRC’s part to bring owner-managed companies under the same level of scrutiny as PAYE employees.

None of this is cause for panic if your affairs are in order but from the 2025–26 tax return getting it right really matters.

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