HMRC has confirmed that requirements to report additional information will come into effect from the 2025-26 tax year or possibly a later period.
HMRC has set out its intention to collect data relating to trade sectors; locations; occupations; hours worked; shareholdings and dividends paid; and self-employed trading dates.
Draft legislation has now been released that provides for regulations to adjust the personal tax return to collect the relevant data. The draft indicates that the new regulations will take effect for periods beginning in 2025-26.
The employee working hours data will be reported by employers for each pay period on RTI returns, extending the existing requirements to give a less specific indication of hours worked. This will allow HMRC to track the accuracy of tax credit claims and also police minimum wage legislation more accurately.
Self-employed start and end dates are already requested on the self-employment pages of the tax return, so the only change will be to mandate the completion of those boxes. If they are not completed in the future HMRC will be able to impose a flat £60 penalty. A clear definition of when a trade or letting business starts and closes for tax purposes will be essential for the smooth operation of MTD ITSA which is also due to come in to force in 2026.
HMRC has not been clear about why it will need a breakdown of dividend income between that generated from the taxpayer’s own company and dividends from other sources. As the taxpayer must also report what percentage of the company’s shares is held by the individual, it seems reasonable to assume that this may be a further analysis tool relating to personal service companies which may not be applying the IR35 rules correctly.
The Government has also confirmed that it will not require businesses to provide data on the industry sectors in which they operate or their worker occupations, mainly due to the difficulties in fitting real businesses and job descriptions into pre-defined boxes. However, it will explore how to collect business location data as part of the new digitised business rates system. Businesses will not be required to provide this information on their tax returns.
We will, of course, continue to work with you to ensure the accuracy and completeness of all submissions to HMRC in relation to payroll, personal and corporate tax returns now and in the future as these rules are introduced.