Sole trader vs limited company (2026/27)

Sole trader: your profit is your income. You pay Income Tax through the progressive bands plus Class 4 National Insurance, all through Self Assessment.

Limited company: the company pays Corporation Tax on profit. You then take money out as a small salary plus dividends, and pay dividend tax personally at lower rates than income tax. The combined bill is often lower.

• Annual accounts and a Corporation Tax return
• Confirmation statement and Companies House filings
• Payroll/RTI if you take a salary
• Accountancy fees, typically a few hundred pounds a year upwards
• Public records: your company accounts are visible to anyone

Limited liability, credibility with larger clients, and agencies that will only engage companies. If you contract through agencies, check the IR35 status of each engagement — inside-IR35 work removes most of the tax benefit.

The calculator shows a rough limited-company comparison next to your sole trader take-home, so you can see whether the gap is big enough to justify the extra admin at your profit level.

At what profit is a limited company worth it?

Commonly around £40,000-£50,000 of profit and upward, once the tax saving comfortably exceeds accountancy and admin costs. It depends on how much you need to draw out.

Can I switch from sole trader to limited company later?

Yes, and most people do it that way — incorporate once profit justifies it, transferring the trade to the new company.

Do I still file Self Assessment with a company?

Yes, as a director drawing dividends you normally file a personal return as well as the company's accounts and Corporation Tax return.