The Transition Challenge
Incorporating from sole trader to limited company is often a smart business decision — for tax efficiency, liability protection, or professional reasons. But it creates a temporary complication for mortgage applications.
The Problem
Before Incorporation
3 years of sole trader SA302s showing strong, consistent income. Clear evidence for lenders.
After Incorporation
New company with 0 years of accounts. Sole trader history technically belongs to a "different" entity.
The good news
Timing Considerations
Scenario 1: Incorporate Then Apply
Best for: Those who aren't planning a mortgage for 12+ months
Scenario 2: Apply Before Incorporating
Best for: Those who need a mortgage in the next 6-12 months
Scenario 3: Recently Incorporated
Best for: Those who've already incorporated and need a mortgage now
Establishing Continuity
The key to a smooth mortgage application after incorporating is demonstrating continuity — proving that your new company is essentially the same business you were running as a sole trader.
What Establishes Continuity
Strong Continuity
- • Same type of work/services
- • Same or similar clients
- • Similar income levels
- • No gap between structures
- • Accountant letter confirming transition
Weak Continuity
- • Different business type
- • New/different client base
- • Significantly different income
- • Gap between trading structures
- • No documentation of transition
The Accountant's Letter
A letter from your accountant is often crucial. It should confirm:
- You traded as a sole trader from [date] to [date]
- You incorporated as [Company Name Ltd] on [date]
- The nature of the business remained the same
- Historical income levels (from SA302s) represent the same trading activity
Get this letter early
Documentation Required
For Recent Incorporation (Under 1 Year)
From Sole Trader Period
- • SA302s (2-3 years from sole trader period)
- • Tax year overviews
- • Sole trader bank statements (final months)
From Ltd Company Period
- • Company bank statements (from incorporation)
- • Draft/management accounts (if available)
- • Companies House confirmation statement
Transition Documents
- • Accountant continuity letter
- • Certificate of incorporation
- • Evidence of ongoing contracts/clients
For Established Ltd (1+ Years)
- • Certified company accounts (1-2 years)
- • Personal SA302s (showing salary + dividends)
- • Company and personal bank statements
- • Accountant letter (if continuity still relevant)
Lender Approaches
Flexible Lenders
Accept continuation of trade and will combine sole trader history with new company trading.
May require: Accountant letter, evidence of same business nature
Moderate Lenders
Will consider sole trader history but may want 6-12 months of Ltd company trading before accepting.
May require: Some company trading history plus accountant confirmation
Strict Lenders
Require company accounts only. Don't count sole trader history. Need 1-2 years of Ltd company accounts minimum.
May need to wait until company has established accounts
Strategic Options
Strategy 1: Apply as Sole Trader First
If you haven't incorporated yet and need a mortgage soon, apply as a sole trader. Incorporate after the mortgage completes.
Best for: Urgent mortgage needs, strong sole trader history
Strategy 2: Wait for Company Accounts
If you've recently incorporated, wait until you have 1-2 years of company accounts. This opens more lender options.
Best for: Flexible timeline, planning ahead
Strategy 3: Use Continuity Lenders
Target lenders who explicitly accept continuation of trade. Prepare strong documentation proving the transition.
Best for: Recent incorporation, urgent mortgage need
Strategy 4: Use Day Rate Assessment
If you're contracting, day rate lenders may not need company accounts at all — they assess based on your contract rate.
Best for: Contractors with strong day rate contracts
Incorporation is not a barrier
Navigate your transition smoothly
Get matched with lenders who understand incorporation transitions.
Get matched