Incorporation · 2026
Quick answer
Many sole traders consider incorporating once profits consistently exceed what they need to live on, often somewhere above £50,000, because a company lets you retain profit at Corporation Tax rates. There is no fixed threshold: dividend rates, admin costs, liability and client requirements all matter. Compare both on your figures first. — LimitedCompany.Accountants, ICAEW-regulated accountants for UK limited companies.
When to switch from sole trader to limited company in 2026: profit levels, tax comparison, incorporation steps, asset transfers, VAT, contracts and reliefs.
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 21 October 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
Content updated 21 October 2026. Official references are listed below.
Incorporation is a decision about tax, risk and administration. The steps are straightforward, but transferring the business needs planning around assets, goodwill, VAT and contracts.
When incorporation can make sense
Tax comparison
Transfer steps
Goodwill and assets
VAT and contracts
Profits regularly push you into higher-rate tax, you want to reinvest profit, clients require you to trade through a company, or you want limited liability. Lower profits, cash needs equal to all profit, or concerns about admin and public filing can point the other way.
Sole traders pay Income Tax and Class 4 NIC at 6% between £12,570 and £50,270 and 2% above. A company pays Corporation Tax and directors usually take a small salary and dividends taxed at 10.75%, 35.75% or 39.35%. Dividend rate increases from April 2026 have narrowed the advantage at lower profits.
Rates, thresholds and dates reflect the UK position at the content update date, including measures announced for future tax years. Check current GOV.UK guidance, or ask us, before relying on them.
Form the company, complete identity verification for directors and PSCs, register for Corporation Tax and PAYE, open a business bank account, transfer customers and contracts, and notify HMRC that self-employment has ceased. Your final sole-trader Self Assessment includes profit to the cessation date.
Transferring assets and goodwill to the company is a disposal for CGT. Incorporation relief can defer gains where the whole business and all assets except cash are transferred in exchange for shares. Business Asset Disposal Relief has an 18% rate from 6 April 2026. Goodwill values need to be supportable.
A VAT-registered business may transfer as a going concern, and the company may take over the VAT number. Leases, finance agreements, insurance and supplier contracts must be moved into the company name.
Primary references
Local help
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
There is no single figure. Many people review it when profits exceed about £50,000 and are not all needed personally. Use our calculator and ask for a comparison.
Usually yes, if the business transfers as a going concern and the company applies to take over the registration.
Potentially on goodwill and assets. Incorporation relief or gift relief may defer it if conditions are met.
Generally yes. Contracts should be novated or reissued in the company's name.
Company formation is often quick once identity verification is complete; the full transition usually takes a few weeks.
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.
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.
Two ways to work with us
Everything is fixed price and agreed before we start. Prices are the same whether you are in London, Morden, Croydon or anywhere else in the UK.
All-inclusive packages
One fee covering your company’s filing calendar, with the price based on your turnover band.
One-off online filing
No monthly commitment. Add what you need to one basket and pay by card, with government fees shown separately at cost.
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