Limited Company vs Sole Trader 2026/27
For the same annual profit, which structure delivers more take-home, incorporated as a Ltd company or trading as a self-employed sole trader?
Last updated: August 2026
Annual profit
For a sole trader: business profit. For a Ltd company: profit before any director's remuneration or CT.
Winner
Sole Trader
by £1,406/year
Sole Trader
Net take-home
£40,268
19.5% total tax burden
Limited Company (£12,570 salary + dividends)
Net take-home
£38,862
22.3% total tax burden
Choosing between Sole Trader and Limited Company
The two structures pay tax very differently:
- Sole trader: One taxpayer. All profit is yours, taxed at income tax + Class 4 NI (6% / 2%) on the bit above £12,570.
- Limited company: Two taxpayers. The company pays Corporation Tax (19% small profits, 25% main), then anything paid out to you as salary or dividend is taxed personally on top.
At low profits (~£30-50k) the gap is small, Ltd usually wins by a few hundred pounds. At higher profits the Ltd gap typically grows, but admin costs (accountant, Companies House filings, personal Self Assessment) eat into it.
- Profit under ~£40k where the Ltd advantage is too small to justify the admin overhead.
- Income that varies wildly year-to-year, sole trader loss relief works against your other income directly.
- Side hustle on top of an employed salary, where the salary already uses up your Personal Allowance.
- Simplicity. Self Assessment once a year vs. annual accounts, confirmation statements, payroll, P11Ds, and a separate Self Assessment.
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Reviewed by
Alexandre Bernier, LLM (UK), CFP®, CIM®, PFP®. Financial planner with 18 years in banking and wealth management, holding a UK master of laws and the Canadian CFP®, CIM® and PFP® designations. Writes and reviews every calculator and article on FinanceToolz.
Last updated: August 2026. How figures are sourced, reviewed and corrected is set out in our editorial policy. This is general information, not regulated financial advice.
Sources
Every rate and threshold used by this calculator is taken from the official pages below. If a figure here disagrees with one of these, the official page is right, please tell us.