Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026
The quick answer To move from sole trader to limited company you incorporate a company at Companies House, transfer your business and assets to it, register for corporation tax, and set up payroll and possibly VAT afresh. Done at the right time and correctly, it can save tax and limit your liability.

How the switch works

  1. Decide the timing. Incorporating usually pays once profits are high enough that the tax saving beats the extra admin.
  2. Form the company. Register at Companies House with directors, shareholders and share capital.
  3. Transfer the business. Move your trade, and any assets and goodwill, to the company, dealing with the tax on the transfer.
  4. Re register with HMRC. Register the company for corporation tax, set up PAYE for director pay, and re register for VAT if applicable.
  5. Close the sole trader side. Tell HMRC you have stopped as a sole trader and file a final Self Assessment return.

The tax points to get right

Transferring goodwill and assets has tax consequences, and there can be reliefs that reduce the tax on incorporation. Getting the director pay, dividends and VAT set up correctly from day one avoids problems later. This is a moment where good advice usually pays for itself several times over.

Thinking of incorporating?

The timing and the transfer both affect your tax. TaxTune models whether it is worth it, forms the company, and handles the transfer and registrations correctly.

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Frequently asked questions

How do I change from sole trader to limited company?

You incorporate a company at Companies House, transfer your business and assets to it, register for corporation tax and payroll, re register for VAT if needed, and file a final sole trader Self Assessment return.

When should I incorporate?

Usually once profits are high enough that the tax saving from a company outweighs the extra admin and cost. Liability and growth plans also matter, so it is best modelled on your figures.

Is there tax when transferring my business to a company?

There can be, on goodwill and assets, but reliefs such as incorporation relief may reduce or defer it. Getting the transfer right is important, which is where advice helps.

Do I need a new bank account and VAT registration?

Yes. A company must have its own bank account, and VAT registration is in the company name, so you re register rather than carry over the sole trader registration.

What happens to my sole trader tax?

You tell HMRC you have stopped trading as a sole trader and file a final Self Assessment return covering the period up to the switch.