Running the firm, 29 October 2026
Going limited: what changes in your admin when a sole trader becomes a Ltd
When a sole trader becomes a limited company, the business becomes a separate legal person with its own bank account, tax and filings. You take on annual accounts and a confirmation statement at Companies House, a Company Tax Return and Corporation Tax at HMRC, a payroll for yourself, and a new CIS registration. Expect more admin, not less.
What changes on day one?
The company, not you, now does the work, signs the contracts and gets paid. That one change drives everything else in this guide.
Customers should contract with the company, so quotes, invoices, your website and emails need the company's registered name. Business letters, order forms and websites must also show the registered number, the part of the UK where the company is registered and the registered office address. The rules treat a document in "hard copy, electronic or any other form" the same, so your PDF quotes and email signature count.
You need a business bank account in the company's name. Money paid into it belongs to the company. You can't move it to your personal account whenever you like the way a sole trader can.
This back-end stuff, which is just a nightmare.
A five-person builder and roofer in the North East went the same way: self-employed, then limited, with turnover of £100,000 to £120,000 and expecting it to double. In both firms the filings weren't the hard part. Keeping the company's money, receipts and paperwork separate from the owner's, every week, was.
What do you file with Companies House?
Three things, on a cycle that never stops while the company exists.
- Register the company.
£100 online. You need at least one director, at least one shareholder, a registered office address in the UK, a SIC code describing what you do, and an email address that Companies House can contact you on.
- Verify your identity.
Since 18 November 2025, every director must verify their identity with Companies House. New directors give their personal code when the company is incorporated.
- File a confirmation statement every year.
At least once every 12 months, and no later than 14 days after the review period ends. The fee is £50 online. You can't file it until every director is verified.
- File annual accounts.
Your first accounts are due 21 months after the company was registered. After that, accounts are due 9 months after the end of each financial year.
- Report changes.
A new director, a new address or a change in who controls the company must be reported.
Your registered office address is public. If you work from home, use your accountant's address or a registered office service instead, with their permission. A Royal Mail PO Box can't be used.
What changes with HMRC?
You swap Self Assessment for your trade for a Company Tax Return, and you add a payroll. Personally, you'll still do a Self Assessment return if you take dividends above the allowance.
| What | Sole trader | Limited company |
|---|---|---|
| Tax on profit | Income Tax plus Class 4 National Insurance (6% between £12,570 and £50,270, 2% above) | Corporation Tax: 19% up to £50,000 of profit, 25% above £250,000, marginal relief between |
| Return | Self Assessment | Company Tax Return, due 12 months after the accounting period ends |
| When tax is paid | 31 January and 31 July | 9 months and 1 day after the accounting period ends |
| Paying yourself | Drawings, no paperwork | Salary through payroll, dividends with a voucher and minutes, or a director's loan |
| Records | Keep for at least 5 years after the 31 January deadline | Keep for 6 years from the end of the financial year |
| Making Tax Digital for Income Tax | Applies from April 2026 over £50,000, April 2027 over £30,000 | Doesn't apply to the company |
You must register as an employer before your first payday, even if the only person on the payroll is you as sole director. Employer National Insurance is 15% above £5,000 a year in 2026 to 2027. The Employment Allowance of up to £10,500 can't be claimed by a company whose only employee paid above that threshold is its single director, so it helps only once you employ someone else.
If you employ anyone, the company needs employers' liability insurance with at least £5 million of cover. Close relatives are an exception. You can be fined £2,500 for every day you aren't properly insured.
How does money get from the company to you?
Through salary, dividends or a director's loan, and each one leaves a paper trail. This is the part that catches most new directors.
Dividends can only be paid from available profits. For each one you need a dividend voucher (date, company name, shareholders, amount) and minutes of the directors' meeting that declared it, even if you're the only director. Anything else you take is a director's loan and goes in a director's loan account, which shows on the balance sheet at the year end.
Where £40,000 of company profit goes if it is all paid as dividends
Illustration only: one director-shareholder, no other income, no salary, 12-month accounting period, no associated companies, England, 2026 to 2027 rates.
| Company profit | £40,000 |
| Corporation Tax19% × £40,000 | £7,600 |
| Left to pay as dividends£40,000 − £7,600 | £32,400 |
| Covered by the Personal Allowance0% | £12,570 |
| Dividend allowance0% on the first £500 | £500 |
| Taxed at the basic dividend rate£32,400 − £12,570 − £500 = £19,330 × 10.75% | £2,078 |
| Total tax£7,600 + £2,078 | £9,678 |
What happens to CIS and VAT?
Both need fresh attention. HMRC treats the company as a new business for CIS, and VAT registration doesn't move over by itself.
CIS. The company must register for CIS before it can be paid, and apply again for gross payment status if you want it. HMRC's manual says the company can use the sole trader's turnover for the turnover test only where there's true continuity, meaning the same people running the same kind of business. Each director and shareholder must also pass the compliance test. Until it's sorted, contractors will deduct at the higher rate. More in CIS explained.
VAT. If you're VAT-registered as a sole trader, you have two routes. Cancel that registration when you stop, as GOV.UK's closing checklist says, and register the company. Or apply on form VAT68 to transfer your VAT number to the company, which then also takes on any VAT the old business still owes. Ask your accountant which suits you, and plan it so there's no gap in charging VAT. If you aren't, the company must register once its taxable turnover for the last 12 months goes over £90,000, or will within the next 30 days.
What still needs doing for the sole trader business?
Close it properly. Tell HMRC you've stopped trading as a sole trader, send a final Self Assessment return covering your last profits, close any PAYE scheme you ran, and call the CIS helpline if you were registered.
Should you go limited?
That depends on your profits, how you want to pay yourself, who you work for and your appetite for admin. The quick check below points you to the right conversation. It isn't advice.
Take last year's accounts and an estimate for this year. Ask for a side-by-side of sole trader and limited company, including their fees and your admin time.
Going limited adds filings and paperwork. Get your bookkeeping and receipts under control as a sole trader, then revisit.
At lower profits the savings are often small next to the extra costs and admin. Recheck when your profits or clients change.
Get an accountant's view before you incorporate, not after. The right choice depends on figures this page can't see, and the transfer of vans, tools and contracts has tax consequences of its own.
Where Nexley fits
Nexley is the AI back office for UK trade firms: five AI assistants run your tenders, quotes, buying, scheduling and invoicing. It connects to the tools you already work in, you run it all from WhatsApp, and you approve everything. £799 a month.
After you go limited, Nexley keeps the company's paperwork moving over WhatsApp: supplier bills against the job, quotes and invoices on your company template with the right disclosures, and reminders for filing dates. You send a photo or voice note, Nexley drafts, and you approve. Your accountant still files the accounts and returns.
Common questions
Do I need an accountant to run a limited company?
Not by law, but most small trade firms use one. As a director you stay legally responsible for the records, accounts and tax even if someone else does the work.
Can I keep my sole trader business name?
Usually, if the company name is available at Companies House and doesn't break the naming rules. You can also trade under a different name, but your documents must still show the company's registered name.
Do I have to pay myself a salary?
No, but if you do, the company must run payroll and register as an employer before the first payday. Many directors take a small salary and dividends; your accountant will suggest the split.
Does Making Tax Digital for Income Tax apply to my company?
No. It applies to sole traders and landlords. Once you're only a director and shareholder, the company files a Company Tax Return instead, though you may still file Self Assessment for your dividends.
Sources
- GOV.UK: Companies House fees
- GOV.UK: Verifying your identity for Companies House
- GOV.UK: Filing your company's confirmation statement
- GOV.UK: Accounts and tax returns for private limited companies
- GOV.UK: Corporation Tax rates
- GOV.UK: Income Tax rates and allowances
- GOV.UK: Taking money out of a limited company
- GOV.UK: Rates and thresholds for employers 2026 to 2027
- GOV.UK: Employment Allowance eligibility
- GOV.UK: Register as an employer
- HMRC manual CISR43210: sole trader or partnership becoming a company
- GOV.UK: Register for VAT
- GOV.UK: Transfer your VAT registration
- GOV.UK: Transfer a business as a going concern (VAT Notice 700/9)
- GOV.UK: Stop being self-employed
- GOV.UK: Self-employed National Insurance rates
- GOV.UK: Making Tax Digital for Income Tax for sole traders and landlords
- legislation.gov.uk: Names and Trading Disclosures Regulations 2015
- GOV.UK: Employers' liability insurance
- GOV.UK: Company and accounting records
Every rule, rate and date above was checked against these sources on the date shown at the top.
Topic: Running the firm
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