Limited company guide
How to incorporate an existing sole trader business: transferring assets and goodwill, incorporation relief, VAT and PAYE registrations, contracts, and telling HMRC.
Short answer
Incorporating a sole trader business means transferring the trade and its assets to a new company, usually in exchange for shares. The sole trade ceases for tax on the transfer date, the company starts a new corporation tax period, and assets pass at market value. Incorporation relief can defer any capital gain where the whole business, other than cash, is transferred as a going concern in exchange for shares.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityIncorporating a sole trader business means transferring the trade and its assets to a new company, usually in exchange for shares. The sole trade ceases for tax on the transfer date, the company starts a new corporation tax period, and assets pass at market value. Incorporation relief can defer any capital gain where the whole business, other than cash, is transferred as a going concern in exchange for shares.
What actually transfers
Tax on the transfer
Registrations and admin
Timing it
Before you act
Equipment, stock, work in progress, customer contracts, goodwill, domain names and brand. Each is transferred at market value, documented by a short business transfer agreement rather than an informal note.
Trade debtors and creditors are often retained personally and collected outside the company, which keeps the opening company balance sheet simple.
The sole trade ceases, so a final Self Assessment covers the period to cessation, with balancing adjustments on capital allowances and stock valued under the relevant cessation rules.
Goodwill transferred to a related company generally does not attract corporation tax relief for the company, and the gain on it is chargeable on you. Incorporation relief defers the gain where the whole business, other than cash, goes across for shares; alternatively Business Asset Disposal Relief may apply on a qualifying disposal. Which route is better depends on the value and your plans, so model both.
The company needs its own corporation tax registration, and a new PAYE scheme unless the existing one is transferred under succession rules. For VAT you can either register the company afresh or transfer the existing number using form VAT68, which carries the history, including any errors, with it.
Update bank accounts, insurance, contracts, terms of business, invoicing details and your website. Invoices issued after the transfer date must be in the company's name, or the income is not the company's.
Transferring at the end of a month or a natural trading break makes the accounting clean. Aligning with the start of a tax year simplifies the personal position.
Do not begin trading through the company before it exists, and do not leave a period where it is unclear who contracted with the customer.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.
Primary references
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We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
You tell HMRC the self-employment has ceased and file a final Self Assessment return for the period to cessation.
Yes, by transferring it to the company with form VAT68, which also transfers past liabilities and history.
A deferral of the capital gain on transferring a business as a going concern, with all assets other than cash, in exchange for shares in the company.
Generally not on goodwill transferred from a related party on incorporation. Take advice before valuing it.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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