Reminder for OMB’s and self-employed: New HMRC reporting requirements come into force from April 2025
Jonathan Hall · Posted on: March 6th 2025 · read
Last year, HMRC announced proposals that will require owner-managed businesses and employers to change the information they provide to HMRC through income tax Self-Assessment and PAYE real time information (RTI) returns.
Ahead of April 2025 when these changes will come into effect, here is a timely reminder about what these proposed changes will involve, along with fresh updates that have emerged.
To recap
In an effort to improve compliance and reduce tax avoidance, HMRC will introduce new data reporting requirements for both employers and individuals, coming into effect from the 2025-26 tax year onwards.
These new reporting requirements will allow HMRC to continuously improve the quality of data they gather from taxpayers, ultimately allowing them to identify non-compliance with increasing accuracy. This will of course lead to additional compliance costs for both business owners and the self-employed.
Who will be affected?
The key changes will affect both shareholders of owner managed businesses and individuals. HMRC will be looking for the following information to be reported to them from April 2025:
- Shareholders in owner managed businesses (OMBs) Where dividends are paid to shareholders in owner-managed businesses, the details of their percentage shareholding, alongside the dividend on the shareholder’s Self-Assessment Tax Return, will need to be declared.
- Self-employed Start and end dates of self-employment need to be declared yearly on Self-Assessment Tax Returns.
- Employers The hours worked by all employees will need to be reported via Real Time Information (RTI) payroll submissions returns (this was under consultation which meant that these proposals were postponed until to April 2026, however following these consultations HMRC have decided to no longer move ahead with this change due to the administrative burden on employers).
What is changing, and what are your obligations?
Below is a breakdown of the specific changes, and how and where they will be applied to businesses and individuals:
From the tax year 2025-26, new rules regarding dividend disclosure will be enforced. Individuals associated with owner-managed businesses will be required to use the Employment Pages (SA102) within their Self-Assessment Tax Return, to report dividend income received from their own companies, as well as the percentage shareholding they hold in their own companies. This will apply where the taxpayer is a director and holds shares in a close company.
For 2025/26 onwards, the questions about whether an individual is a director of a close company become compulsory, and the return must also include:
- the name and registered number of the close company
- the amount of dividends received from the close company, which must be declared separately from other dividends, and
- details of the highest percentage of share capital held in the year.
HMRC will seek to raise penalties (a fixed penalty of £60) for failure to provide this information.
Individuals will need to declare when any self employment commenced or ceased from April 2025 onwards. It is unclear how this will be reported to HMRC, but it is likely to be via the Self Employment Pages (SA103).
The reporting of start and end dates for any self-employments will increase the information that is held by HMRC and allow them to target self-employed individuals, where they consider that the individuals could potentially be employees. The self-employed versus employed status of a taxpayer can be an extremely complex area and in HMRC’s opinion, the length of the self-employment can have an impact on a taxpayers’ status. The reporting of these dates could lead to additional questions being raised by HMRC, therefore impacting the taxpayers’ tax position.
HMRC will seek to raise penalties (a fixed penalty of £60) for failure to provide this information.
The proposals starting from 6 April 2026, required employers to complete RTI returns and provide HMRC with details of the number of hours worked by each employee, in respect of a pay period, provided that the information can be determined. If the information cannot be determined, employers will need to confirm the reason as to why they are unable to do so. This information would have enabled HMRC to focus on national minimum wage (currently £11.44 for 2025-26) and related living wage compliance.
The information that was due to be supplied varied depending on how the employees are paid:
- for hourly paid workers, the employer should report the number of hours actually worked.
- for employees receiving an annual salary, the employer should report the contractual hours as per the employees’ contracts and should also include details of overtime hours paid.
- for other salary payments, such as statutory payments, termination payments or benefits in kind - no hours would need to be reported.
HMRC have now announced that this will no longer be implemented.
Plan ahead to ensure compliance
Ahead of the new reporting requirements coming into effect from April 2025, businesses and employers should consider their current compliance position. They should review the data that will need providing to HMRC and undertake internal reviews to ensure the minimum wage requirements are being met.
Additionally, new processes and systems may need to be introduced, including the implementation of new payroll or HR systems.
Other considerations
HMRC’s ‘Making Tax Digital (MTD) for Income Tax’ is a replacement for the Self-Assessment tax return, and upon its implementation will affect the majority of self-employed and/or those that receive property income. MTD supports their plans to digitilise the tax system where taxpayers will need to maintain their records digitally report their income to HMRC digitally on a quarterly basis. MTD for income tax was originally meant to become mandatory from April 2024 however, it has now been delayed until April 2026 and be applicable to businesses and landlords with income over £50,000. Please ensure that if this applies to you then you are ready. Please do contact us if you would like to discuss this further.
In October 2024, The Chancellor announced changes to National Insurance and the Employment Allowance potentially resulting in higher National Insurance payments becoming due from April 2025.
With effect from April 2025 Employer’s National Insurance will increase to 15% (from 13.8%). Additionally, the starting point on which employer’s pay National Insurance will be reduced from £9,000 per annum to £5,000 per annum. Despite this, HMRC have removed the restrictions on claiming the annual Employment Allowance (removal of the £100,000 threshold).
This will increase the National Insurance payments by employers, therefore it may be advisable to revisit any remuneration planning for owner managed businesses.
If you would like some further discussions regarding any points raised then please do contact us.
As mentioned at the start of this article, HMRC collect and hold a vast amount of data which enables them to uncover links between individual taxpayers and businesses, income, assets and transactions.
HMRC collect this data using their Connect system, which can trace even the smallest discrepancy in spending or earnings, prompting an investigation. Many understandably find an HMRC investigation disruptive, intrusive, stressful, time-consuming, and ultimately expensive.
To protect yourself in the event of an investigation, you may want to consider a Fee Protection Service.
Conclusion
From April 2025, new reporting requirements will provide HMRC with increased information, enabling them to identify errors and areas of risk for tax avoidance. This will result in an increased tax compliance burden on companies and the self-employed, and an increased risk of HMRC compliance checks.
Our experts' final thoughts
"Companies will need to review their current situations, systems, and potentially invest in new software, to ensure any changes required are implemented before the new requirements become compulsory."
Our tax experts understand the challenges that businesses and individuals face to meet the evolving regulations from HMRC, and we can help guide you in navigating your compliance obligations.
Please contact our private client tax team to discuss this matter further, or with any other tax-related queries.
