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?
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.
Related calculators
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