Business Structure
Sole Trader vs Ltd Company — Which Is Better? UK
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 4 National Insurance; compulsory Class 2 is not charged in this estimate. 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.
There is no universal profit level at which incorporation is better. This estimate includes company tax and employer NI, but does not price company administration, accountancy or different pension arrangements. Compare the displayed annual amounts under its assumptions, then account for the costs and obligations relevant to your business.
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?
This calculator cannot decide whether you should incorporate. The tax comparison depends on profit, salary, dividends, employer NI, other income and reliefs. Administration, accountancy fees, liability and pension choices also matter; these are not all priced in the result. Review the assumptions and obtain advice for your circumstances.
How much does it cost to run a limited company?
Annual running costs include: accountant fees (£100-200/month), Companies House confirmation statement fee (£50/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?
For 2026/27, Class 2 is treated as paid when annual profits reach £7,105. Below that level voluntary Class 2 costs £3.65 a week. Class 4 applies above £12,570 at 6%, then 2% above £50,270. This calculator excludes voluntary Class 2.
Illustrative 2026/27 England/Wales/Northern Ireland comparison: one company, a full 12-month accounting period, no associated companies or Employment Allowance, and all available profit distributed. Other income, pension costs and personal reliefs are excluded. Company profits fund both salary and employer NI.