Introduction – A Year of Change and Opportunity
At Accounting Matters, we work with hundreds of sole traders every year — builders, consultants, hairdressers, landlords, and every kind of small business you can imagine.
And if there’s one thing we’ve learned, it’s this: the best time to plan ahead isn’t when HMRC changes the rules — it’s before they do.
2025 is shaping up to be one of the most important years in recent memory for small business owners. Between frozen tax thresholds, higher compliance demands, and the upcoming Making Tax Digital for Income Tax Self Assessment (MTDITSA) changes, we’re seeing more and more sole traders reach out to us asking the same question:
“Should I move to a limited company now — or wait?”
Our answer is simple: now is the perfect time to get ahead.
In this blog, we’ll share why incorporating early in 2025 gives you a head start, what the transition involves, and how we at Accounting Matters make the whole process simple, structured, and stress-free.
The Cost of “Doing Nothing”
Let’s start with the truth that many business owners don’t want to hear: doing nothing still costs you money.
Every year we meet clients who delayed switching to a limited company because they thought it would be “too complicated” or “not worth it yet”. A year or two later, they’re paying more tax, facing quarterly MTDITSA submissions, and wishing they’d acted sooner.
Here’s why waiting doesn’t pay:
- You pay more tax than necessary
Once profits climb past £40,000–£50,000, sole traders typically start paying thousands more in tax and National Insurance than they would as limited company directors.
- You lose control over your timing
When MTDITSA comes into force in 2026, every sole trader with income over £30,000 will need to file updates four times a year. The admin pressure will be significant — and last-minute incorporations during that period will be stressful and expensive.
- You miss the opportunity to plan properly
Incorporation works best when it’s carefully mapped out. That means setting up your accounting software, tax structure, payroll, and dividends correctly from day one. Doing it under time pressure usually leads to mistakes.
At Accounting Matters, we’ve seen the difference that acting early makes — and it’s not just financial. It’s about peace of mind, better planning, and feeling confident that your business is ready for the future.
The Benefits of Moving Early
Moving to a limited company isn’t something you rush. It’s something you plan strategically — and the sooner you start planning, the smoother the process is.
Here’s what we tell our clients when they ask why 2025 is the right year to switch:
1. More time to plan your salary and dividends
By incorporating at the start of a new tax year, we can help structure your director’s salary and dividends in the most tax-efficient way. It’s not just about what you pay — it’s how and when you pay it.
2. A clean bookkeeping start
We can set up your company records fresh in Xero, Dext, and Hubdoc — all integrated and compliant with digital requirements. That means no messy crossover between your old records and your new company ones.
3. Early access to tax savings
At the right profit level, incorporation can save you £2,000–£3,000 a year in tax — and that’s before you even factor in pension contributions or family shareholdings.
4. A chance to future-proof before MTDITSA
When quarterly reporting becomes mandatory for sole traders in April 2026, limited companies will already be ahead. They’re used to structured reporting, annual accounts, and digital filing. You’ll already be compliant, calm, and confident — while others are scrambling.
At Accounting Matters, our goal is to make sure you’re one of the prepared ones.
The 2025 Accounting Landscape
Let’s look at what’s changing.
MTDITSA (Making Tax Digital for Income Tax Self Assessment)
From April 2026, sole traders and landlords with income over £30,000 must file updates every quarter. That means more deadlines, more admin, and more reliance on software.
As a limited company, you’re already working within a digital system. Xero, Dext, and Hubdoc take care of day-to-day transactions; we review your data quarterly, submit your reports, and plan for your tax in advance.
We’re already doing what MTDITSA will require — which means you’ll be ahead of the curve.
Frozen Tax Thresholds
When the personal allowance and tax bands don’t rise with inflation, more of your income gets dragged into higher tax bands. We call it “bracket creep.” For sole traders, that can mean paying more even when you’re not earning more.
A limited company allows us to control how you’re paid — using salary, dividends, and pension contributions to manage your personal tax position.
More Scrutiny, Less Simplicity
HMRC’s systems are becoming smarter. Random checks are becoming digital audits. That means being organised isn’t optional anymore — it’s essential.
We’ve built our digital systems around compliance, automation, and accuracy. Every client who works with us benefits from that structure.
How Accounting Matters Supports Every Step
When you choose to move from sole trader to limited company, there’s a lot to consider — but that’s where we shine.
Here’s how we help:
1. We handle the full incorporation process
We register your company with Companies House, notify HMRC, and handle all the initial setup. You don’t need to navigate the paperwork — we’ve got it covered.
2. We set up your software stack
We use Xero, Dext, and Hubdoc to create a digital record-keeping system that’s MTDITSA-ready and gives you real-time visibility of your business.
3. We structure your director’s pay
Our team reviews your figures to find the most tax-efficient mix of salary, dividends, and pension contributions — ensuring you only pay what’s necessary.
4. We plan for the long term
Each client is invited to a Month-9 Tax Planning Meeting, where we review performance, forecast profits, and make adjustments before year-end. This proactive approach keeps clients in control, not surprised.
5. We provide personal, approachable support
We know incorporating can feel daunting, so we make it human. You’ll have a dedicated contact in our team who walks you through each step — no jargon, no confusion, just clarity.
Client Example – Getting Ahead Early
One of our clients, a self-employed plumber from Derbyshire, approached us in 2024. His profits were growing fast, but he was paying around £9,000 a year in tax and National Insurance.
We incorporated his business at the start of 2025, structured his pay, and added his wife as a shareholder. We also set up his pension contributions through the company.
In his first year as a limited company, his overall tax bill dropped by more than £2,800 — and he told us he finally felt like he was “working for the business, not the taxman.”
That’s the difference planning early makes.
Why “Later” Is Too Late
We understand — change takes time. But when it comes to incorporation, “waiting until next year” can be costly.
- By waiting, you risk starting your company mid-year and splitting your accounting periods (which complicates things).
- You’ll have less time to plan how to draw income tax-efficiently.
- You’ll miss another full tax year’s worth of savings.
The earlier we start planning your move, the smoother the first year runs.
That’s why we’re encouraging our sole trader clients to start the conversation now, so everything is in place before MTDITSA and before April’s new tax year.
Why Choose Accounting Matters
At Accounting Matters, we’re not just accountants — we’re planners, advisors, and partners to your business journey.
We’ve thought through every step of the incorporation process so you don’t have to. From compliance to strategy, from software setup to salary planning — we make sure you start as you mean to go on.
Our approach is built on five key values: Flexibility, Persistence, Positivity, Trust, and Teamwork.
They guide everything we do, from your very first meeting to your annual review.
And because we’re local, approachable, and human, you’ll always have someone you can pick up the phone to — not a faceless online portal.
Conclusion – 2025: The Smart Year to Switch
The best time to incorporate isn’t when HMRC forces your hand. It’s when you can do it calmly, correctly, and with expert guidance.
2025 gives you that window.
By acting now, you can:
- Lock in a full year of potential tax savings.
- Build digital systems that meet future HMRC rules.
- Plan your pay structure in advance.
- Enter 2026 organised, compliant, and confident.
At Accounting Matters, we’ve helped hundreds of clients make this transition seamlessly — and we’d love to do the same for you.
Let’s make 2025 the year you take control, reduce your tax stress, and build a stronger business foundation.
📞 Call us today on 01773 747990
📧 welcome@accountingmatters.co.uk
🌐 www.accountingmatters.co.uk
Because at Accounting Matters — Accounting really does MATTER.