Owner-Managed Business will need to gear up for additional reporting requirements in 2025

HM Revenue & Customs (HMRC) has published draft legislation designed to improve data it collects from customers.

The stated intention of the proposed changes are, that from April 2025,

• employers will have to provide more detailed information on employees’ hours paid via Real Time Information PAYE reporting
• directors in owner-managed businesses will be required to provide the amount of dividend income received from their own companies separately to other dividend income, and the percentage share they hold in their own companies via their Self-Assessment return
• the self-employed will need to provide information on start and end dates of self-employment via their self assessment return.

HMRC’s explanatory notes set out the reason for the changes for directors:

“Many individuals who carry on their personal business through a company…remunerate themselves mainly by way of dividends rather than through payments of salary. Under current reporting mechanisms, it is not possible for HMRC to distinguish between the origin of dividends received and whether they are derived from an individual’s own company or as dividends from other sources. This makes it difficult to separate this group out from other dividend taxpayers and to then identify and understand issues they face in making tax easier to get right, for example, ensuring they receive appropriate targeted communications about issues they may encounter in their tax affairs.”

The additional information that will be collected will be

• the name and registered number of the close company
• the amount of dividend income received from the close company that year
• the person’s highest percentage shareholding in the close company that year.

Why the change?

HMRC is collecting more data from multiple sources to bring together information that enables them to more appropriately target tax enquiries, with income tax avoidance through streaming of dividends and use of payroll being of particular interest.

As HMRC marches towards Making Tax Digital, with implementation due to start in April 2026, this change would appear to be another stepping stone towards real time reporting of information for these types of income (on top of those to be collected for the self-employed and UK landlords).

We can help you to navigate the complexities of the UK tax system and keep you the right side of the line when it comes to remuneration planning, as well as ensuring the correct information is provided as part of your compliance obligations. Please get in touch with Nick Latimer or your usual Crowe contact to discuss further.