Limited Company vs Sole Trader Calculator

🇬🇧 Free Tool · 2026/27 Tax Year
Limited Company vs Sole Trader Calculator: which leaves you more?
Enter your expected profit and see a full side-by-side: income tax and Class 4 NI as a sole trader versus salary + dividends through a limited company — using 2026/27 rates including the new higher dividend tax.

Sole trader

Income tax–
Class 4 National Insurance–
Take-home–

Limited company (salary + dividends)

Director salary–
Employer NI–
Corporation tax–
Dividend tax (personal)–
Take-home–

How the two structures are taxed in 2026/27

Sole trader: profit is yours personally, taxed at 20/40/45% income tax plus Class 4 NI (6% between £12,570 and £50,270, 2% above). Simple, one Self Assessment, but no separation between you and the business.

Limited company: the company pays corporation tax (19% up to £50,000 profit, 25% above £250,000, marginal relief between), then you extract money as a small salary plus dividends. The calculator uses the classic strategy — a £12,570 salary (deductible for the company, no employee NI due) with the rest as dividends. The squeeze: from April 2026 dividend tax rose to 10.75% basic / 35.75% higher (39.35% additional), with only a £500 allowance — so the gap between the two structures is the narrowest it's been in years.

It's not only about the tax number

A company still wins on other fronts: limited liability (your house isn't on the line), credibility with clients and lenders, flexible profit timing (leave money in the company in high-income years), pension contributions paid pre-corporation-tax, and income splitting with a shareholding spouse. Against that: Companies House filing (with identity verification now mandatory), a confirmation statement, corporation tax returns, payroll — and accountancy costs of £500–£1,500 a year that a sole trader avoids. Below roughly £30,000–£40,000 of profit, simplicity usually wins; above it, run the numbers and weigh the extras.

Frequently asked questions

At what profit is a limited company worth it?

With the 2026/27 dividend rates, the pure tax saving is modest until profits comfortably exceed £50,000 — but liability protection, pension flexibility, and profit retention can justify incorporating earlier. Run your number above.

Why pay yourself a £12,570 salary from your company?

It uses your personal allowance (so no income tax), sits at the employee NI threshold (so no employee NI), still earns a qualifying year for the State Pension, and is deductible against corporation tax. The employer NI above £5,000 is usually a price worth paying.

Can I switch from sole trader to limited company mid-year?

Yes — incorporate, transfer the trade, and register for corporation tax; your sole-trader period is reported on a final Self Assessment. Timing it at your accounting year-end keeps it cleanest.

Do I still file a Self Assessment with a limited company?

Usually yes — as a director taking dividends above £500 you'll declare them on a personal return alongside your salary.

Get the structure right from day one

FincSol Accountancy advises on incorporation, sets up the company, runs payroll and dividends, and files everything — Companies House, corporation tax, and your Self Assessment. Dedicated personal accountant. No long-term contract.

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Assumes 2026/27 rates (England/Wales/NI), a single-director company (no Employment Allowance), £12,570 salary, all post-tax profit distributed, and no other personal income. Excludes VAT, student loans, and pension planning. Guidance only — talk to us before deciding. Related: salary calculator · dividend tax calculator · limited company services.