Business Structure
Sole Trader vs
Ltd Company
Tax Year
2026/27
Corp Tax
19%
Should you stay sole trader or incorporate as a limited company? Enter your annual profit and see both options side by side. The calculator compares income tax, NI, corporation tax and dividends so you can see exactly where the crossover point is.
Business Details
Ltd company wins
You keep £0 more per year
Sole Trader
Ltd Company
How the sole trader vs ltd calculator works
Enter your annual business revenue and expenses. The calculator computes your taxable profit, then models two scenarios. As a sole trader, your profit is taxed as personal income: income tax plus Class 2 and Class 4 National Insurance. As a ltd company, you pay yourself a £12,570 salary (using the Personal Allowance), pay corporation tax on remaining profit, then take the rest as dividends.
The crossover point where ltd becomes more tax-efficient than sole trader is typically around £30,000-40,000 profit. Below that, the accountancy costs of running a limited company (£1,200-2,400/year) eat into the savings. Above that, the gap widens quickly because dividends attract 8.75% tax versus 20% income tax plus 6% Class 4 NI.
For a more detailed breakdown of the ltd company side, use our dividend vs salary calculator to optimise the salary/dividend split. For sole trader tax specifically, try our self-employed tax calculator.
Frequently asked questions
When should I switch from sole trader to limited company?
The crossover point is typically around £30,000-40,000 profit per year. Below that, the simplicity of sole trader outweighs the tax savings. Above £40,000, the combination of corporation tax at 19% plus dividend tax at 8.75% is significantly cheaper than income tax at 20-40% plus Class 4 NI.
How much does it cost to run a limited company?
Annual running costs include: accountant fees (£100-200/month), Companies House filing fee (£13/year), corporation tax return preparation, and payroll processing. Total ongoing costs are typically £1,200-2,400 per year.
What tax do sole traders pay in 2026/27?
Sole traders pay income tax on profits (20% basic, 40% higher, 45% additional) plus Class 4 NI (6% on profits between £12,570 and £50,270, then 2% above). Class 2 NI was abolished from April 2024. The Personal Allowance of £12,570 applies.