SME Accounting News & Deep Dives: HMRC's Director Nudge Letters, SA102 Dividend Boxes & the Autumn Budget Build-Up
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Wednesday 9 September 2026 edition | Author: Jessica
This week brings an important reminder for owner-managed companies: HMRC is comparing company information with directors’ personal tax returns more closely than before.
The main development is a new round of nudge letters for directors of close companies. These letters highlight new SA102 reporting requirements for the 2025/26 tax year, including dividend and shareholding details. We also look ahead to the Autumn Budget on 28 October, review the next MTD for Income Tax quarterly update and cover two brief technical updates affecting employers and packaging businesses.
If you have been searching for an accountant near me, the key message is simple: do not wait for a letter, deadline or Budget announcement before checking your records.
HMRC nudge letters: what close-company directors need to know
HMRC is sending letters to some directors where dividend information shown in company accounts appears not to match the information declared on the director’s personal Self Assessment return.
A nudge letter is not the same as a formal tax enquiry. It is a compliance prompt designed to encourage you to check your position and correct any error. However, ignoring the letter can increase the risk of HMRC opening a formal enquiry later, particularly where the information remains inconsistent.
The letters relate to new mandatory information requirements for directors of close companies from the 2025/26 tax year.
Most small owner-managed companies will be close companies. Broadly, a close company is controlled by five or fewer participators, or by its directors. If you are unsure whether your company falls within this definition, ask one of the accountants for small business in our curated accountant directory.
What are SA102 boxes 7.1 to 7.4?
Where you are required to file a Self Assessment return and are a director of a close company, you must provide additional information on the SA102 employment pages.
The new boxes require you to report:
- Box 7.1: The company name.
- Box 7.2: The company registration number.
- Box 7.3: Dividend income received from that close company.
- Box 7.4: Your highest percentage shareholding during the tax year.
You need to complete a separate SA102 for each close company directorship. The requirement can apply even if:
- You received no salary from the company.
- You received no dividends.
- You held no shares.
- The company was dormant.
- You resigned as a director during the tax year.
Where there was no dividend income, enter zero rather than leaving the box blank. The same applies to shareholding where you held no shares.
A fixed £60 penalty may apply per tax return where the required information is missing or incorrect. HMRC’s stated position is that this is one penalty for the return, rather than a separate £60 penalty for every directorship, company or missing box. Even so, completing every relevant field accurately is the safest approach.
The 2025/26 online Self Assessment return is normally due by 31 January 2027. You can check the current dates using the Self Assessment deadlines reference.
How to respond to a nudge letter
If you receive a letter, do not assume that it automatically means you have made a mistake. Instead, work through the following checks:
- Compare dividend vouchers with your personal tax return. Check the dates and amounts of dividends received during 2025/26.
- Review the company accounts and board minutes. The amount declared as a dividend should be supported by the company’s records.
- Check the SA100 and SA102 together. Company-specific dividend information should be consistent with the overall dividend figure on your tax return.
- Confirm your shareholding percentage. Where your shareholding changed, the relevant figure is generally the highest percentage held during the tax year.
- Check every close-company directorship. Do not review only the company that appears to have triggered the letter.
If the return is wrong, you may need to correct it. If you discover an undeclared tax liability, an adviser may also recommend an unprompted disclosure through HMRC’s Digital Disclosure Service, which can help demonstrate that you are correcting the position voluntarily and may reduce penalties compared with waiting for HMRC to identify the issue.
If your records are correct, respond to HMRC and explain the position clearly. Keep copies of your dividend vouchers, accounts, board minutes, calculations and correspondence.
A specialist Self-Assessment accountant can help you reconcile the company and personal records before you respond.
Autumn Budget build-up: prepare without acting on rumours
The Autumn Budget is confirmed for Wednesday 28 October 2026, and will be delivered by Chancellor John Healey.
No new tax changes have been confirmed for the Budget yet. Limited companies should therefore avoid changing dividend plans, investments or remuneration arrangements purely because of speculation.
However, there are several areas that growing SMEs should monitor.
Business rates and hospitality relief
Business rates reform is expected to remain an important topic. One area of speculation is a possible 20% relief for hospitality businesses from April 2027, although the final scope, eligibility conditions and implementation details still need to be confirmed.
Hospitality companies should not build an assumed saving into their forecasts until the Budget or later legislation provides the precise rules.
Distributions and capital extraction
HMRC’s consultation on modernising the taxation of distributions and repayments of capital from companies closes on 14 September 2026.
The consultation considers whether some transactions currently taxed as capital should instead be treated as income. Areas under discussion include:
- Repayments of capital.
- Company share buy-backs.
- Holding-company structures.
- Loans to shareholders.
- Distributions from non-UK companies.
- Transactions involving continuing businesses.
Nothing changes for 2026/27 simply because the consultation exists. Current rules still apply. Nevertheless, anyone considering a company reorganisation, share buy-back, solvent liquidation or other capital extraction plan should obtain advice before committing to a structure.
Corporation Tax and investment measures
The Budget may also include targeted Corporation Tax measures, such as changes to capital allowances, investment incentives or R&D relief.
If your business is planning a major purchase, expansion or software development project, prepare the numbers now. A good forecast should show:
- The expected cost and timing of the investment.
- The effect on cash reserves.
- The possible Corporation Tax relief.
- Whether the company will still have enough cash for VAT, PAYE and Corporation Tax.
- Whether the investment is commercially justified without a tax saving.
A pair of corporation tax accountants can model the tax and cash-flow effect before your company places an order.
MTD for Income Tax: second quarterly update due 7 November
The second MTD for Income Tax quarterly update for 2026/27 is due by 7 November 2026.
For taxpayers using the standard tax-year basis, the update is cumulative and covers 6 April to 5 October 2026. It is not limited to transactions from the most recent three-month period.
This matters to company directors who also have personal business or property income. MTD for Income Tax does not replace the annual Self Assessment return, and the quarterly update does not remove the need to keep accurate digital records.
The updates are mandatory, but HMRC has confirmed that penalty points will not apply for late quarterly updates during 2026/27. That should not be treated as a reason to delay. Correct cumulative figures are easier to prepare when bookkeeping is maintained regularly.
Two brief technical updates for SMEs
Payslip fraud and umbrella workers
HMRC has highlighted guidance on payslip fraud affecting agency workers, temporary workers, contractors and people paid through umbrella or payroll companies.
Businesses using temporary labour should check that workers receive clear payslips and that PAYE deductions are properly accounted for. Warning signs can include:
- Unexplained changes in take-home pay.
- Frequent changes of employer or umbrella-company name.
- Vague deductions labelled as administration or adjustments.
- PAYE deductions that do not match the worker’s records.
- Missing payslips or restricted access to payslip portals.
Employers and agencies should keep evidence of their supply-chain checks, payroll reconciliations and communications with umbrella providers.
Plastic Packaging Tax from April 2027
From 1 April 2027, the Plastic Packaging Tax rules will change to allow a mass balance approach for qualifying chemically recycled plastic.
At the same time, pre-consumer plastic waste will no longer count as recycled content for the relevant threshold. Businesses that manufacture or import plastic packaging should review their suppliers, certification, records and packaging calculations well before the change takes effect.
What limited companies should do this week
Use this checklist to prepare:
- Review whether you are a director of any close company.
- Gather dividend vouchers, board minutes and company accounts.
- Check the new SA102 boxes 7.1 to 7.4 for every relevant directorship.
- Reconcile company dividends with your personal tax return.
- Prepare a cash-flow forecast before the Autumn Budget.
- List planned investments, R&D projects and profit-extraction decisions.
- Check whether the 7 November MTD update applies to your personal income.
- Review payroll controls if you use agency or umbrella workers.
- Assess whether Plastic Packaging Tax changes affect your business.
Self-Assessment tick-box: Confirm whether you have reported every close-company directorship, entered the correct dividend amount and shareholding percentage, and used zero where no dividend or shareholding applies.
SA registration form
If you need help reviewing a director’s tax return, dividend records or MTD position, complete the SA registration form through our Self-Assessment accountant service.
Accountant Search is a curated directory and digital matchmaking/referral platform. We help limited companies and growing SMEs compare suitable advisers, including a business accountant UK businesses can work with remotely or locally.
You can also explore our limited company accountant service or find an accountant near me through the platform.
For further reading, see the previous Friday 4 September SME Accounting News & Deep Dives edition and the Wednesday 2 September edition.
This article is for general information only and reflects the position understood on 9 September 2026. Tax rules, consultations and Budget proposals can change. Obtain professional advice before correcting a return, making a distribution or restructuring a company.