New Year New Challenges Frequent flyers know of my issues over incorporation/companies for BTL investors which are unchanged - especially following November's Budget. Most investors set up or incorporated into 'close' companies which differ to open companies [6 or more shareholders]. For example, tax on profits is 25% and not 19%. The dividend tax increases from April - an additional 2% - applies to investment companies as well as trading companies. How many corporate investors are aware of new dividend reporting rules for the current year 2025/26? Self-assessment is becoming the medium of choice for the tax authorities - look at the new rules regarding incorporation from this April. From last April there are new, enforceable requirements - via self-assessment - requiring disclosure on the following: That you were a director of a close company Company name and registration number Dividends received [reported separately] The highest percentage of shares you held during the year This last point is the key change; if your shareholding changed at any point, HMRC requires the maximum percentage you held and not the position at year-end. For every omission there is a £60 penalty - though this is not the real issue. The change provides HMRC far clearer details of: Dividend allocations that don't match share ownership Arrangements designed to suppress income tax Situations where dividends are more like salary in disguise Directors are not deliberately doing anything wrong but often running strategies not reviewed as the business evolved. However, if HMRC decides dividend income is disguised employment income the resultant action could be painful: Higher income tax NICs - both employer and employees Penalties and late interest At the very least directors should re-visit this subject and perhaps at the same time learn of alternate strategies which provide potentially better rewards.

Posted by Chris Haley at 2026-01-15 13:38:23 UTC