Thinking of Setting Up a Limited Company?
Are you currently self-employed and considering transitioning to a limited company?
If so, this guide is for you.
Moving from a sole trader to a limited company structure is a significant step and it comes with legal and financial responsibilities, including notifying HMRC that you’ve stopped being self-employed.
Here’s what you need to know.
Do You Need to Deregister as Self-Employed?
Yes. If you’re ceasing self-employment entirely and trading only through your limited company, you’ll need to deregister from self-employment with HMRC.
However, if your limited company operates a different trade to your current sole trader business, you can run both simultaneously and there’s no need to deregister.
How to Deregister from Self-Employment
When you stop being self-employed, you must notify HMRC as soon as possible. You can do this:
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Online via your Government Gateway account
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By completing the online form: Stop being self-employed (Form CWF1)
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Or by writing to HMRC
HMRC will not automatically know you’ve stopped being self-employed even if you register a company, start PAYE employment, or claim benefits. You must tell them directly.
What Else You’ll Need to Do
Before or shortly after deregistering, make sure you:
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Complete a final Self Assessment tax return for the last period of self-employment (due by 31 January after the end of the tax year)
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Pay any tax owed, including Class 2 and Class 4 National Insurance
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Cancel your VAT registration (if applicable)
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Notify HMRC’s CIS helpline if you were registered under the Construction Industry Scheme and are no longer working in construction
Telephone: 0300 200 3210 -
Keep business records for at least 6 years, even after stopping trade
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Update your contact address with HMRC in case they need to reach you (especially if you move within 12 months of submitting your final return)
What Happens If You Don’t Deregister?
If you don’t inform HMRC that you’ve stopped trading:
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They will continue to send you Self Assessment tax returns
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Failure to submit them can result in penalties and estimated tax bills
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These estimates become legally due, unless corrected within 3 years of the original filing deadline
To avoid unnecessary stress and financial risk, notify HMRC promptly.
Setting Up Your Limited Company
When forming a limited company, your first major decision is choosing a name.
You may want to carry over your sole trader brand, or create a new name that reflects your company’s future direction. Use the Companies House name checker to see if your desired name is available.
Once you’ve chosen your name, you can register your company online — or we can take care of the process for you.
Paying Yourself Through a Limited Company
One key difference in running a limited company is how you pay yourself.
Unlike a sole trader, where profits go directly to you, a company is a separate legal entity. Most directors choose a combination of:
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A salary (often set at a tax-efficient threshold), and
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Dividends from company profits
The right balance depends on your overall income, business profits, and other factors such as student loan repayments or pension contributions. Your accountant can guide you through this to ensure you’re making the most tax-efficient choices.
Need Help Making the Move?
At Seed Accounting Solutions, we’ve helped many self-employed business owners transition to limited companies smoothly and with confidence.
We can support you with:
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Deregistering from self-employment correctly
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Forming your limited company
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Setting up a payroll scheme, if needed
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Planning how to pay yourself tax-efficiently
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Staying compliant with HMRC throughout the year
We’re here to help you get set up and trading in no time.
Get in touch today to see how we can support your next step.
