Leaving or Changing Your Trade: The Wind-Down

Whether you are retiring, switching trades or just closing the doors, winding down a self-employed business is more than locking the workshop. You will need to think about the tax on selling your tools and equipment, closing your CRA accounts properly, and turning years of work into a retirement income, because no employer pension is waiting for you. Done in the right order it is straightforward; done in a rush it can leave you with an unexpected tax bill or a frozen estate. This guide walks the wind-down for a sole operator, plus the bigger question of what happens to the business when you stop.‍‌‌​‌‌​​​‌‌​‌‌‌​‌‌​‌‌‌​‌​​​‌​​‌‌‌‍

Selling your tools and equipment

When you sell business assets on the way out, there can be tax to settle, and it is not always intuitive. If you claimed capital cost allowance (depreciation) on tools, vehicles or equipment over the years, selling them for more than their remaining depreciated value can trigger "recapture", which is added back to your income in the year of sale. Sell for less and you may have a terminal loss you can deduct. The practical points:

• Keep records of what you paid, what you claimed in depreciation, and what you sold each item for.
• A van or trailer sold as you wind down is an asset disposal, not just a sale; the recapture rules can apply.
• Personal-use items you never depreciated are usually outside this, but the line can blur, so check with your accountant.

Get the timing and numbers in front of an accountant before you sell, because spreading disposals across tax years can sometimes soften the hit.

Closing your CRA accounts

Stopping work does not close your tax accounts on its own. You will generally need to:

• File a final return covering the period up to when you stopped.
• Close your GST/HST account once your final return is filed and any amounts owing are settled. There can be a deemed disposal of business assets for GST/HST when you deregister, so do this in step with your accountant.
• Close your Business Number once all final returns and balances are dealt with.

Leaving accounts open invites filing obligations and reminder letters long after you have downed tools.

Turning the work into a retirement income

You have no employer pension, so your retirement is whatever you built. CPP is the floor: as a self-employed person you paid both halves of CPP over your career, and that buys you a guaranteed, inflation-indexed income. You can take it at 65, earlier with a reduction, or delay to 70 for a larger payment. On top of CPP, the savings you sheltered in registered plans do the rest. If you have been putting money into an RRSP (2026 contribution room is up to $33,810) or a TFSA (2026 limit $7,000, all withdrawals tax-free), the wind-down is when that planning pays off. A common retirement move is to draw income in a tax-efficient order across these accounts, which is worth mapping out with an accountant a year or two before you stop.

When you are changing trade, not stopping

If you are moving to a different trade rather than retiring, much of the above still applies to the old business: settle its tax, decide what to do with the tools, and either close or repurpose your accounts. Keep your certifications current if there is any chance you will return, and remember that a Red Seal endorsement does not expire just because you stepped away. Treat the switch as closing one business and, often, opening another.

What happens to the business itself

A sole proprietorship has no separate legal life: when the owner stops or dies, the business simply ends. That has real consequences, especially at death, when business accounts can freeze until probate and business debts fall on the estate. If your business has value you want to protect or pass on, planning matters:

• Write a will that says what happens to your tools, equipment and client relationships.
• Consider incorporating if there is real value or you want continuity, because a corporation survives the owner and its shares can be transferred.
• Document the knowledge a successor or family member would need: suppliers, active jobs, pricing, logins.
• Take specialist advice for anything involving significant business value, an estate freeze, or passing the business to children. This is accountant-and-lawyer territory, not a do-it-yourself job.

Common mistakes

• Selling tools without checking the tax. Recapture on depreciated assets can land an unexpected bill in your final year.
• Leaving CRA accounts open. Unclosed GST/HST and Business Number accounts keep generating obligations and letters.
• Assuming CPP is enough. It is a floor, not a full income. Your RRSP and TFSA savings are what top it up.
• No succession plan. A sole proprietorship dies with the owner, and an estate can freeze. A will and, where it fits, incorporation protect what you built.

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

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