Reporting changes to HMRC

Changing your business' legal structure: sole traders, partnerships and limited companies

If you decide to change your business' legal structure, for example if you are a sole trader or partnership and you want to make your business a limited company, you'll have to inform a number of areas of HM Revenue & Customs (HMRC) to ensure your tax affairs are kept in order.

If your business becomes a limited company

If you decide that you want to change your business structure to a limited company, you need to register with Companies House first. You'll also need to tell HMRC, file Company Tax returns and pay Corporation Tax.

Corporation Tax.

If you were previously a sole trader or a partner in a business partnership, you'll need to complete a tax return for the year you stopped trading and started a new company.

If the partnership is ending, the nominated partner will have to fill in a tax return covering the period until the partnership ends. Find out more in our section on Self Assessment.

If you change your business status from a sole trader to a limited company you will also need to tell HMRC that you are no longer self-employed and stop paying self-employed Class 2 National Insurance contributions. You can do this by calling HMRC's self-employed helpline.

Find contact details for National Insurance enquiries for the self-employed on the HMRC website.

If you change your business from a sole trader or partnership to a limited company and become a director you will be an employee of the company. This means even if you have no other employees the company will have to register as an employer and set up and run a PAYE (Pay As You Earn) scheme. The scheme will also cover any other employees you take on. As a company director you'll need to complete a Self Assessment tax return each year (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits).

If you have already been running a PAYE scheme as a sole trader or partnership, you will need to set up a new scheme for your limited company. You will be provided with a new employer PAYE reference number. You can get more advice from your employer Tax Office.

Find contact detail for your Tax Office as an employer on the HMRC website.

See our section on Self Assessment.

If you close your limited company and become a sole trader

If your business has previously been a limited company, you'll need to wind up or make dormant your limited company.

Selling or closing your company and Corporation Tax.

Trading and non-trading for Corporation Tax explained.

If you have been running a PAYE scheme, you'll need to let your Tax Office know about the change of your business' legal structure.

Find contact details for your Tax Office as an employer on the HMRC website.

You'll need to register your new business as a sole trader with HMRC. You do this by registering for Self Assessment. HMRC will then set up tax and National Insurance records for you.

Find out how to register for Self Assessment in our section on Self Assessment.

If your business becomes a partnership

You'll need to register the partnership with HMRC - you do this by registering for Self Assessment. Each partner needs to register for Self Assessment too. HMRC will then set up tax records and National Insurance records (if needed) for both the partnership and partners.

Find out how to register for Self Assessment in our section on Self Assessment.

If you have been running a PAYE scheme, you'll need to let your Tax Office know about the change of your business' legal structure.

Find contact details for your Tax Office as an employer on the HMRC website

If your business was previously a limited company, you'll need to wind it up or make it dormant.

More about making your company or organisation dormant.

Selling or closing your company and Corporation Tax.

If you change your business' legal structure and you are already registered for VAT

You'll need to either cancel your VAT registration and re-register or transfer your existing registration. You must let HMRC know within 30 days of making the change, otherwise you may have to pay a financial penalty.

Changes to your business details and your VAT registration.

Developed with:

HM Revenue & Customs