020 8992 6071
Considering moving from sole trader to limited company? Learn how to incorporate in the UK and understand your ongoing tax and filing responsibilities.
Moving from sole trader to limited company can be an important step in the growth of your business. It may offer greater separation between your personal and business finances, support future investment and provide limited liability.
However, incorporation is not automatically right for everyone.
This guide explains how to start a limited company in the UK, complete your Companies House registration and manage the responsibilities that follow.
Should You Become a Limited Company?
As a sole trader, you and your business are legally the same person. You keep the profits after tax, but you are also personally responsible for business debts.
A limited company is a separate legal entity. For a company limited by shares, shareholders’ liability is generally limited to any amount still unpaid on their shares. Personal guarantees or certain director conduct can still create personal liability.
When remaining a sole trader may make sense
Operating as a sole trader may suit you if you are testing a business idea, running a relatively simple or low-risk operation, or prioritising straightforward administration.
You normally report your profits through Self Assessment and have fewer formal filing obligations than a limited company.
When incorporation may make sense
Setting up a limited company may be worth considering if your business is growing, employing people, taking on greater risk or seeking investment.
It can also provide greater flexibility over ownership, retaining profits and bringing new shareholders into the business.
However, incorporation does not automatically reduce tax. The outcome depends on your profits, salary, dividends, other income and personal circumstances. You must also consider the additional administration and accountancy costs.
The right question is not simply, “Will I pay less tax?” It is, “Which structure best supports the way I intend to run and grow the business?”
How to Register a Limited Company
To incorporate a company in the UK, you must apply to Companies House.
At the time of writing, online registration costs £100 and applications are usually processed within 24 hours. Once approved, Companies House issues a certificate of incorporation confirming that the company legally exists.
1. Choose your company name
Your company name cannot normally be the same as another registered name.
A similar name may be accepted initially, but you could be required to change it if Companies House decides it is too like an existing name following a complaint. Certain sensitive words also require approval.
Before registering, check the Companies House register, UK trade marks, website domains and social media usernames. A name being available at Companies House does not necessarily mean it is safe to use as a brand.
2. Select the correct SIC code
A Standard Industrial Classification, or SIC, code describes the type of activity your company carries out.
You can choose more than one, but each should accurately reflect what the business does. An unsuitable SIC code can make the public record misleading and may cause confusion when dealing with banks, insurers or other organisations.
3. Appoint your directors
Every private limited company must have at least one director aged 16 or over.
Directors are legally responsible for running the company and ensuring its accounts, tax returns and Companies House filings are completed properly.
A private limited company does not have to appoint a company secretary.
4. Complete director identity verification
Director identity verification is now part of the incorporation process.
When registering a new company, you must provide the Companies House personal code of each director. This code is issued after the individual has successfully verified their identity.
People with significant control, known as PSCs, must also verify their identity and provide their code within the deadline that applies to them. Someone who is both a director and a PSC must connect their verified identity to each role separately.
Read our Companies House Identity Verification Guide 2026 for further guidance.
5. Choose a registered office
Your company must have an appropriate physical registered office in the UK jurisdiction where it is incorporated.
Official correspondence must reach someone acting for the company, and delivery must be capable of being acknowledged. A Royal Mail PO Box cannot be used on its own.
The address appears on the public Companies House register. If you do not want to use your home address, you may be able to use an accountant, solicitor or authorised address service with their permission.
You must also provide a registered email address, although this is not displayed publicly.
6. Confirm shareholders and PSCs
A company limited by shares must have at least one shareholder, who can also be a director.
You will need to provide details of the shareholders, the number and value of the shares and the rights attached to them.
You must also identify the company’s PSCs. This commonly includes anyone who holds more than 25% of the shares or voting rights, although other forms of control may also qualify.
Where there are several founders or investors, professional advice can help prevent ownership problems later.
7. Submit the application
Your Companies House registration will generally include:
- the company name;
- registered office and email address;
- director details and personal codes;
- shareholder and PSC information;
- the statement of capital;
- the SIC code; and
- documents explaining how the company will be run.
Check all information carefully before submitting the application.
What Happens After Incorporation?
Company formation is the beginning of your responsibilities, not the end.
Corporation Tax
If you use the GOV.UK online incorporation service, your company will usually be set up for Corporation Tax at the same time, unless it is dormant.
HMRC will send the company a 10-digit Unique Taxpayer Reference, or UTR. If Corporation Tax services were not activated during registration, you should add them to the company’s business tax account when it starts doing business.
Bookkeeping and business banking
A limited company must keep accurate records of its income, expenses, assets and debts.
Its finances should be kept separate from those of its directors and shareholders. A dedicated business bank account makes this clearer and simplifies bookkeeping.
Keeping records up to date also helps you understand cash flow, profitability and future tax liabilities.
Accounts, tax returns and confirmation statements
Your company must prepare annual accounts and a Company Tax Return.
First accounts are normally due at Companies House 21 months after incorporation. Later accounts are generally due nine months after the financial year end.
Corporation Tax is normally payable nine months and one day after the accounting period ends. The Company Tax Return is due within 12 months.
The company must also file a confirmation statement at least once every 12 months, even when nothing has changed.
PAYE and VAT
If the company employs staff or pays a director through payroll, it may need to register as an employer and operate PAYE before the first payday.
VAT registration is generally compulsory if taxable turnover exceeds £90,000 over the previous 12 months, or is expected to exceed £90,000 within the next 30 days. Different rules can apply to businesses based outside the UK.
Voluntary VAT registration is also possible, although it creates additional reporting and record-keeping responsibilities.
Common Mistakes to Avoid
Common mistakes when setting up a limited company include:
- choosing an inaccurate SIC code;
- using a registered office where post may be missed;
- overlooking identity-verification requirements;
- missing Companies House or HMRC deadlines;
- assuming incorporation automatically reduces tax;
- issuing shares without considering future ownership;
- taking money from the company incorrectly; and
- leaving bookkeeping until accounts are due.
The registration form itself may appear straightforward, but the decisions made during company formation can affect tax, ownership and administration for years.
Frequently Asked Questions
Can one person start a limited company?
Yes. A private limited company can be formed with a single director and shareholder, and the same person can fulfil both roles.
How long does it take to register a limited company?
Most online applications submitted to Companies House are processed within 24 hours, although times can vary depending on the application and any additional checks required.
Do I need an accountant to set up a limited company?
No. You can register a limited company yourself. However, professional advice can help you choose the right structure, avoid common mistakes and understand your ongoing legal and tax responsibilities.
Can I use my home address as my registered office?
In many cases, yes. However, your registered office address appears on the public Companies House register. Some business owners choose to use their accountant’s or an authorised address service instead.
Does incorporating automatically reduce my tax bill?
Not necessarily. Whether a limited company is more tax-efficient depends on your profits, how you take income, your other sources of income and your individual circumstances.
How J. Dauman & Co. Can Help
You can register a limited company yourself. The value of professional support lies in ensuring the structure suits your plans and that nothing is overlooked after incorporation.
J. Dauman & Co. supports businesses with company formation, Companies House compliance, bookkeeping, annual accounts, Corporation Tax, payroll, VAT and ongoing business advice.
When you are ready to move from sole trader to limited company, we can help you start with the right structure and remain compliant as your business grows.
Together, we grow.