Growing Your Business
As your business grows, its original structure may no longer suit the way you operate. We help you assess when changes are worthwhile and how to organise new business activities.
Growing Your Business
You may find that your business growth means that it is no longer suited to the business vehicle that was originally put in place. Growing a business can also mean dealing with tax obligations which did not apply when you first started.
For example, a sole trade business that you started from home may now have employees, rented premises and a much larger customer base. The risks associated with running the business will have increased, and you may find that there are tax advantages to changing how it operates.
As your business continues to grow, it is worth considering whether your existing arrangements are still the most suitable.
Incorporating your business
For many sole traders, moving the business into a limited company is the next logical step.
A limited company provides some protection for your personal assets against business liabilities. It also offers more options for taking profits from the business, particularly where you do not need to withdraw everything you earn.
However, incorporation is not necessarily the best option for everyone. Incorporation results in additional administrative requirements which can lead to increased costs. The amount of tax you pay will also depend on the profitability of the business and your personal circumstances.
There is no set profit level at which you should incorporate. The right time depends on how much profit the business makes, your other income and how much of the profits you need to take personally.
There are also tax implications when transferring an existing business into a company. The transfer of business assets can give rise to capital gains tax, although Incorporation Relief may allow the gain to be deferred. From 6th April 2026, this relief must be claimed rather than being given automatically.
Tax Innovations can assess whether incorporation would be beneficial, when it should take place and how the transfer should be carried out.
Expanding into new business activities
Growth may also involve moving into new areas of trade. If you already operate through a limited company, you will need to decide whether these activities should be carried on within that company or through a separate business.
There may be good commercial reasons for keeping different activities separate, particularly where one carries greater financial risk. Equally, operating several companies can introduce unnecessary costs and administrative work.
The tax position also needs to be considered. Companies under common control can be treated as associated companies, which affects the corporation tax thresholds that apply to their profits. For example, where two companies are associated, the normal £50,000 and £250,000 thresholds are halved for each company. This can result in a higher overall corporation tax liability than operating through a single company.
We can help you consider the options and put the appropriate company arrangements in place before expanding into new activities.
Tax obligations as your business grows
Increasing turnover can bring additional tax obligations, and it is important to understand these before they become a problem.
One of the first thresholds many growing businesses encounter is VAT registration. Businesses must generally register when taxable turnover exceeds £90,000 over a rolling 12-month period, or when they expect to exceed that amount in the next 30 days.
Taking on employees also introduces payroll and National Insurance obligations. As profits increase, the amount of corporation tax payable may change, making it worthwhile to review how profits are used or withdrawn from the business.
Tax Innovations can help you plan for these changes and ensure that your business continues to operate in a tax-efficient manner as it grows.
Business growth advice from Tax Innovations
We have extensive experience of helping businesses with incorporation, tax planning and changes to their company structure.
Whether you are considering moving from self-employment to a limited company, establishing a new business activity or simply want to understand the tax implications of further growth, we can review your circumstances and advise on the options available.
Contact us to discuss your plans.
Get in touch to speak to an expert today
Get in touch today and speak to a member of the Tax Innovations team.
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