Background 

Legislation has been enacted which imposes new mandatory tax return requirements on: 

• taxpayers who start or cease to trade; and 
• directors of close companies.  

The requirements take effect from 5 April 2025 and apply for tax returns for 2025/26 and later tax years. The government estimates that the measure will have an impact on approximately 1.2million taxpayers carrying on a trade and 900,000 directors.  

The measure was announced in 2022 as part of a consultation on options for improving the data HMRC collects from taxpayers and employers. HMRC has confirmed that it will not be taking forward the proposals requiring employers to provide additional information.  

Commencements and cessations 

Where a person starts or ceases to trade during a tax year, they must report the date of commencement/cessation in the tax return for that year. This will affect personal tax returns, partnership returns and trustee’s returns.  

This question is included on the tax return for 2024/25 and earlier years but answering it is voluntary. It will be mandatory to answer the question in the return for 2025/26 and future returns.

Company directors

Existing questions on the tax return ask whether the individual is a company director of a close company. Answering these questions will be made mandatory from 5 April 2025.

In addition, a director of a close company must include the following information in their tax return for 2025/26 and future years:

• the name and registered number of the close company;
• the value of dividends received from the close company for the year. The dividends will be declared separately from other UK dividends; and
• their percentage shareholding in the company during the year. If the percentage shareholding changes during the year, the person should record the highest percentage shareholding.

In broad terms, a close company is a company that is under the control of its directors or five or fewer participators (eg, shareholders). For more detailed guidance, see HMRC’s company taxation manual. 

ICAEW’s view

Richard Jones, Senior Technical Manager – Business Taxation, said: “We’ve previously flagged to HMRC that providing this information won’t always be easy. For example, how do you determine the percentage shareholding where there are different classes of share? HMRC needs to publish detailed guidance to help taxpayers provide the information it wants, and it needs to make clear what the consequences are for the taxpayer for not providing the information.”

Further information

• The Income Tax (Additional Information to be included in Returns) Regulations 2025 (2025/84)
• Consultation outcome Improving the data HMRC collects from its customers
• ICAEW article HMRC should delay plans for employers to provide more data