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If you’re thinking of making the switch from sole trader to a limited company then follow these 'simple' steps from our expert limited company accounting team to guarantee a smooth changeover. 1. Choose Your Company Name Choose a unique name for your limited company. Check that it isn’t already registered with Companies House to avoid any issues. The rules are different compared to that of a sole trader — you cannot have the same name as another limited company. 2. Register Your Limited Company You can register your limited company online through Companies House or with the help of an accountant. It is a straight forward process with most applications approved by Companies House within 24 hours. During registration, you will need: A registered office address (A registered office is a legal requirement for any UK limited company) at least one Standard Industrial Classification (SIC) code to describe the company’s main business activity. at least one director and one shareholder details of every person with significant control (PSC) articles of association (All UK limited companies require articles of association. The articles set out the rules for running the company, which must be abided by company directors at all times). 3. Set Up a Business Bank Account Open a separate business bank account for your limited company. This ensures that your business finances are kept distinct from your personal finances. As the money belongs to the company and not the directors, limited companies should have separate accounts in the company name. Even if your previous sole trader and limited company have the same business name, it is crucial that a new separate bank account is created in the company name, failure to do so could lead to nasty tax implications. 4. Inform HMRC Notify HMRC : Contact HMRC by calling their Self-Assessment helpline at 0300 200 3310 or send a letter. Inform them that you are no longer operating as a sole trader. File Your Final Self-Assessment Return : Submit the final self-assessment tax return for your sole trader business, marking it as the last year of trading. It is important to note that as a director of a limited company it is rather likely that you will be receiving salary and dividends from the limited company, therefore this would need to be reported on future self assessment tax returns and therefore you should not close down your self assessment account with HMRC when ceasing the sole trader business Register for Corporation Tax : After registering your limited company, HMRC will automatically register the company for Corporation Tax. 5. Register for Other Taxes As mentioned above, there is a strong likelihood that salaries will be paid from the limited company, therefore the company will need to register as an employer and set up PAYE. There may also be a need to register the company for VAT or transfer the existing VAT registration from the sole trader. 6. Transfer Assets and Liabilities Depending on your sole trader business, you may need to transfer assets such as, property, machinery, equipment, stock etc.) from your sole trader business to your limited company. Determine how to handle any outstanding debts, ensuring the transition is seamless. It is worth mentioning that transferring assets on incoporation can be a complicated process for some businesses and can have Capital Gains Tax (CGT) implications. We advise speaking to an expert accountant to avoid any costly issues. 7. Notify Your Customers and Suppliers Update your clients and suppliers about your change in business structure. Make sure to revise your invoices, contracts, and payment details to reflect your new company name and structure. 8. Update Your Insurance Review and update your business insurance policies to reflect your new limited company status. This may involve changing liability coverage or adjusting terms for employees. 9. Maintain Proper Accounting and Records Set up an accounting system that complies with company tax regulations. Keep detailed and accurate records to ensure you meet all legal obligations and file taxes on time. By following these steps, you can make a smooth transition from sole trader to limited company in the UK. If you want a reliable and expert accountant to assist you in this process, then get in touch with Bloom Accountants, we have decades of experience and specialise in limited company accounting, and can help you move from Sole Trader to Limited Company with ease.

Buy-to-let property investors Mr & Mrs Hanif had three major goals for their property income: To provide for a fulfilling lifestyle To save up for their daughter’s further education. To provide financial security for their family’s future Both husband and wife had been building up their property portfolios since 2002, and with a review each year, they were confidently operating through the most tax efficient structure… …until 2017. A government tax change would mean a reduction in the couple’s disposable income and a devastating increase in tax Prior to 2017, you could deduct finance costs, like mortgage interest from your rental income. In 2017 HMRC started phasing out the finance costs you could deduct over a 4 year period, and simultaneously introduced a new relief called “tax credit”. These tax credits, which came into full effect from April 2020, meant that landlords could no longer deduct any of their mortgage interest from their rental income when calculating their taxable profit. Instead, landlords would receive a 20% tax relief on mortgage interest payments. Sounds fair - right? The problem is, as the couple’s portfolio increased to 20+ properties over the next couple of years, the additional income tax was crushing them. Mr and Mrs Imran’s property partnership held £4.8m of property in a mixed residential portfolio, mortgaged and generating £285,000 of gross rents per annum. With mortgage interest of £95,000 per year and other costs, the net profit was around £100,000 per year. The change in tax relief for the finance costs meant that the profit would be pushed from £100,000 to £195,000 pa, into the additional (45%) rate band, and then only allow a 20% tax credit on the mortgage interest, costing approximately £21,000 more in tax each year. Mr and Mrs Hanif were desperate to find a way to save some tax. Anybody would be. Taking all things into account, it was decided that the best solution for the Hanif’s would be to incorporate the partnership. As it was a relatively new rule, we carried out research, attended property tax seminars and spoke to similar property tax experts in the field. Mr and Mrs Hanif had been a client of ours since 2014, after becoming increasingly frustrated by the lack of communication and support from their previous accountants. At Bloom, our mission is to help young families run successful businesses without compromising their families and their lives. Your goal of saving for your children’s education may not be important to every accountant. But it is of the utmost importance to us. We didn’t set out to be traditional thinking accountants. We believe in family first. Which is why it was so important to us to understand everything we could about the new legislation, and put the Hanif family back in a position of control. We found a series of steps could be taken to potentially wipe out these additional tax costs for the couple - but they would have to be carried out meticulously. The end result would be to transfer all current properties held individually into a limited company structure. Caution was needed because: Typically the sale of an asset from an individual that is connected to the limited company would incur stamp duty. In addition, the same transaction potentially would give rise to capital gains tax. At the time, they held approximately 23 properties, so the stamp duty and capital gains tax implications would be huge - we’re talking hundreds of thousands of pounds. We would need to form a partnership, run it for a few years and then incorporate the partnership into a limited company. With certain tax reliefs available this would completely mitigate the stamp duty and capital gains tax. Once incorporated, the company could be structured in such a way that would give the inheritance tax protection they so desperately sought for their young daughter. Overall, the couple gained a £400k directors loan account, and saved over £3m in taxes across stamp duty, capital gains tax, income tax and inheritance tax. We advised that a full accounting system be installed so that we all had full transparency over the figures, and this would aid the incorporation process. In addition, it would help in the future as each property’ s profitability would be able to be analysed in meticulous detail. We worked closely with Mr and Mrs Hanif, ensuring all the correct information for each property was collected, including getting the properties professionally valued. Incorporating the partnership resulted in HUGE tax savings for Mr and Mrs Imran: There was an added benefit in the creation of a credit directors loan account of £410,000. This meant that the couple had the potential to draw down £410k from the company completely tax free! The couple saved over £3m in taxes across stamp duty, capital gains tax, income tax and inheritance tax. Mr and Mrs Hanif were absolutely over the moon that we were able to save so much money. This money could be used to fund their current lifestyle - take the ski holidays they so loved and go on adventures. It would provide for their daughters future and also the future of their business - investing in more properties. Work with accountants who will look at every possibility to protect the things you care about Every business owner's goals and circumstances are different. Although you may not need a property incorporation, tax legislation in itself is huge and not a burden to carry on your own. The good news is, there are tax saving opportunities out there. You just need an accountant you can trust to look at all the possible legal avenues. We’re chartered tax advisers and have the skill and expertise to help clients save as much as tax possible - look into our tax diagnostic service to see how we could help you. Most importantly, we know what family means. If you’re feeling like the balance is off and you need support to be able to prioritise the most important things in life - Bloom accounting is designed for you.