Starting 5 April 2025, significant changes will affect sole traders and company directors regarding their Self-assessment tax returns. The UK government has enacted legislation mandating additional disclosures to enhance transparency and accuracy in tax reporting.
Key Changes for Sole Traders
For sole traders, the new requirements focus on the commencement and cessation of trading activities:
- Mandatory Reporting of Trading Dates: If you start or cease trading within a tax year, you must now report the exact dates of these events in your Self Assessment tax return. Previously optional, this information becomes compulsory for the 2025/26 tax year onwards.
Important Updates for Company Directors
From 5 April 2025, individuals completing self-assessment tax returns will be required to declare if they are directors of a close company. This information, previously optional, becomes mandatory for the 2025/26 tax year onwards. Additionally, directors of close companies must provide specific details in their tax returns for the 2025/26 tax year and subsequent years:
- Company Identification: Report the name and registered number of the close company.
- Dividend Income: Declare the total value of dividends received from the close company during the tax year, separate from other UK dividends.
- Shareholding Percentage: Indicate your percentage shareholding in the company throughout the year. If this percentage varied, record the highest shareholding held during the year.
These measures aim to enhance transparency and ensure accurate reporting of income and ownership interests by company directors.A close company is generally defined as a UK-based, privately owned company controlled by five or fewer participators or by any number of participators who are also directors. ‘Participators’ typically refer to individuals with a share or interest in the company’s capital or income, such as shareholders or certain creditors. For comprehensive guidance, refer to HMRC’s Company Taxation Manual.
Preparing for the Changes
To comply with these new tax return requirements:
- Maintain Detailed Records: Accurately document your trading activities’ start and end dates and keep comprehensive records of all income sources.
- Review Accounting Practices: Ensure your accounting methods align with the upcoming reporting standards. Consider consulting with a tax professional to adapt to these changes effectively.
- Stay Informed: Regularly check official HMRC communications and trusted sources for updates on tax regulations affecting your obligations.
How Care Accountancy Can Assist
Navigating these changes can be complex, but Care Accountancy is here to help. Our team offers:
- Personalized Consultations: We assess how the new requirements impact your situation and provide tailored advice.
- Record-Keeping Support: Assistance in setting up efficient systems to track essential dates and financial information.
- Compliance Guidance: Ensuring your tax returns meet all new mandatory requirements, minimizing the risk of errors or penalties.
For more information and support, visit our Self Assessment Services page.
Stay Ahead with Care Accountancy
Proactive planning is crucial in light of these upcoming changes. By preparing now, you can ensure a smooth transition and compliance with HMRC regulations. Contact Care Accountancy today to schedule a consultation and stay ahead of your tax obligations.
Note: This blog is based on information available as of February 2025. Always refer to official HMRC resources or consult a tax professional for the most current guidance.
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