What happens to your business if you die – planning ahead as a sole trader

It’s not the cheeriest subject, but it’s one every self-employed person should think about: what happens to your business if something happens to you?

Unlike limited companies, where the business is a separate legal entity, a sole trader and their business are legally the same. This means if you die, your business doesn’t automatically continue, and unless you’ve put some plans in place, things can quickly become complicated for your family or executor.

This guide explains what typically happens when a sole trader dies, and what you can do now to make things easier for the people left behind.

Your business and your estate are the same thing

Because your business income and assets are legally yours, they become part of your estate when you die. That includes:

• Business bank account balances
• Outstanding invoices or payments owed to you
• Work in progress or orders not yet fulfilled
• Equipment, tools, and any stock

It also means any business debts or liabilities fall to your estate too. This can include tax bills, supplier invoices, business loan balances, or equipment leases. If you’re in a partnership, a different set of rules apply – see setting up a business partnership.

Your executor takes over your financial affairs

If you have a will, the person you’ve named as executor will be responsible for managing your estate, including dealing with your business affairs. That may involve collecting debts, paying suppliers, contacting clients, or winding down the business.

If you don’t have a will, the process becomes slower and more stressful for your family. The rules of intestacy decide who gets what, and no one can take formal control until probate is granted.

You can read about this in more detail on GOV.UK: Wills, probate and inheritance.

Business bank account access

If you use a separate business bank account (and you should), the bank will freeze it once they are told you have died. This is standard procedure to prevent fraud, but it means no one can access your funds until legal documents are in place.

Your executor will need to provide the death certificate and usually the grant of probate before they can access the account. That can take weeks, so if your business income was relied on by others, they may struggle to pay bills in the meantime.

To help, consider including the account details and bank contact info in a simple document for your executor, stored safely with your will.

HMRC and final tax matters

HMRC will need to be notified as soon as possible. Your executor is legally responsible for handling your final tax affairs. That means:

• Filing a final Self Assessment return
• Paying any tax due up to the date of death
• Settling VAT and PAYE if relevant

If you used software such as Xero or FreeAgent, make sure your executor can access your login credentials securely. These tools can make it easier to produce reports and see what income or tax is outstanding.

For official information: What to do when someone dies – GOV.UK

Should you create a business continuity plan?

You don’t need to write a formal “death plan” but it’s worth putting together a short document that outlines the key parts of your business, just in case. This might include:

• Client list with contact details
• Outstanding jobs, contracts, or invoices
• Business bank and software login instructions (in a password manager)
• Contact info for your accountant or bookkeeper
• Details of insurance policies, such as life insurance, professional indemnity, or business liability cover

This sort of document could sit alongside your will or be shared with your solicitor. Even a few simple notes could save a huge amount of time and confusion.

Can your business be passed on?

There’s no automatic way to transfer a sole trader business. Unlike a limited company, which can be inherited or have shares reassigned, a sole trader business ends when you do.

However, someone else – a spouse, friend, colleague – could pick up where you left off and start their own sole trader business doing the same work. But they would need to set up everything afresh: bank accounts, tax registration, contracts, and so on.

If this is something you want to happen, consider including a line in your will or writing a letter of wishes to explain your intentions.

Is insurance enough protection?

Life insurance can help cover debts or provide income to your family, but it doesn’t handle the admin of winding down your business. Likewise, critical illness or income protection insurance only helps while you’re still alive.

For a full list of relevant policies, see what insurance do self-employed people need?

Final thoughts

No one wants to think about their own death, but a bit of planning now can save your family stress and confusion later. Sole traders are particularly vulnerable to disruption, since the business stops when you do.

Start small: review your will, organise your bank accounts, and compile a brief note with the essentials. It doesn’t need to be complicated. But it does need to exist.