Sole trader or limited company?
Put in what your business makes in a year. You'll see what you'd take home each way for 2026 to 2027, and where the rest goes.
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- 2026 to 2027 tax year
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Staying a sole trader leaves you
£2,129 more a year
You'd take home £40,268 as a sole trader and £38,139 through a company, paying yourself everything the business makes.
Sole trader
- You keep£40,268
- Income Tax£7,486
- National Insurance£2,246
Limited company
- You keep£38,139
- Corporation Tax£6,706
- Tax on dividends and salary£3,020
- Employer National Insurance£1,136
- Extra running costs£1,000
For the company we've used a salary of £12,570 and taken the rest as dividends of £28,589, because that works out best of the usual options. A company can still come out ahead if you leave some profit in the business or pay into a pension through it, which this doesn't include.
Sole trader or limited company: the other differencesHow we work it out
It's an estimate, not tax advice. If the numbers are close, check with an accountant.
As a sole trader, your profit is your income. You pay Income Tax on it and Class 4 National Insurance: 6% between £12,570 and £50,270, and 2% above that.
Through a limited company, the company pays you a salary, pays employer National Insurance of 15% on salary above £5,000 and pays Corporation Tax on what's left: 19% on profits up to £50,000, 25% above £250,000, and a rate in between. A company whose only employee is its director can't claim the Employment Allowance to cover the employer National Insurance.
Whatever's left after Corporation Tax is paid to you as dividends. The first £500 is tax free, then dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% above that. We try a salary of £5,000 and of £12,570 and use whichever leaves you more.
It assumes you take everything out each year. It doesn't include pensions, student loans, other income or IR35. Everything stays in your browser.
Questions people ask
Something we haven't covered? Ask us.
At what profit is a limited company better than being a sole trader?
If you take all the profit out each year, for 2026 to 2027 a company rarely leaves you more, because of Corporation Tax, the higher dividend rates and employer National Insurance. It tends to help when you leave profit in the business, pay into a pension through it, or want the protection of limited liability. Try your own numbers above.
What salary should a limited company director take?
Most one-person companies pay either £5,000 (no employer National Insurance) or £12,570 (the full Personal Allowance). Which is better depends on your profit, so the calculator tries both and uses the one that leaves you more.
Does this include IR35?
No. If you work like an employee for one client, IR35 rules can mean you're taxed much like an employee anyway. Check with an accountant if that might apply to you.
Is it expensive to run a limited company?
There's more to do: annual accounts, a Corporation Tax return, a confirmation statement and payroll for your salary. Many people pay an accountant several hundred pounds or more a year, which is why the calculator lets you add those costs.
Read this next
Free guides that explain the numbers in more detail.
- Sole trader vs limited company: which is right for you?7 minute readThe real differences between a sole trader and a limited company in the UK: liability, tax, admin, privacy, costs and when people usually switch.
- Self-employed tax explained: what you pay and when (UK)7 minute readHow self-employed tax works in the UK: profit vs income, allowable expenses, Income Tax and National Insurance rates, payments on account and key dates.
- How to register as self-employed in the UK (sole trader)6 minute readWhen you need to register as a sole trader with HMRC, the 5 October deadline, what you need, how long your UTR takes and what happens next.
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