1. Evaluate if Incorporation is right for your Business 

Moving to a limited company structure offers key advantages but also comes with added responsibilities. Benefits include:

• Limited Liability: Your personal assets are protected, as the business’s finances are separate from your own.

• Tax Efficiency: Limited companies allow you to structure your income through salary and dividends, which can lead to tax savings.

• Enhanced Credibility: Many clients and investors view limited companies as more established and reliable. 

That said, incorporation also requires more rigorous reporting, so ensure it aligns with your long-term business goals. 

2. Register your Company with Companies House 

Forming a limited company requires registering it with Companies House. This process includes selecting a unique company name, designating a registered office in the UK, and appointing at least one director and shareholder (which can be yourself). After registration, you’ll receive a Certificate of Incorporation, officially recognizing your business as a limited company. 

3. Notify HMRC of the change 

Once incorporated, you’ll need to inform HMRC that you’re transitioning from a sole trader to a limited company. Key steps include:

• Deregistering as a Sole Trader: Close your self-employed status through your HMRC/Government Gateway account.

• Registering for Corporation Tax: Limited companies are subject to Corporation Tax on profits, so you’ll need to register within three months of starting business operations.

• Setting Up Payroll: If you plan to pay yourself a salary, register as an employer for Pay as You Earn (PAYE). 

4. Transfer business assets and contracts to your Company 

To formalise your company’s operations, transfer any business assets or client contracts from your sole trader account to the new company. You may also want to open a business bank account in the company’s name to separate your personal and business finances. 

5. Understand new financial and reporting requirements 

Running a limited company means taking on additional responsibilities. Key requirements include:



• Corporation Tax Returns: File these annually with HMRC and pay any tax due within 12 months of your year-end (reduces to 9 months after first accounting period).

• Annual Accounts: Submit these to Companies House & HMRC, which gives a snapshot of your company’s financial health.

• Confirmation Statement: Update Companies House annually with your business’s current details, such as directors and shareholders. 

6. Consider VAT Registration 

If your business revenue exceeds the VAT threshold in a 12 month period (currently £90,000), you’ll need to register for VAT. Even below this threshold, some businesses opt to register voluntarily for potential financial benefits. 

7. Seek professional advice 

Transitioning to a limited company involves more complex tax and regulatory obligations, so working with an accountant can help ensure compliance, optimise tax strategies, and make the process smoother. 

By following these steps, you can take advantage of the benefits of incorporation while staying on top of your new responsibilities. 

If you would like to hear more or find out if transitioning to a Limited Company works for your business, click ‘Contact Us’ above.