Free tool
Sole Trader vs Limited Company
Should you go limited? Compare your total tax and net take-home as a sole trader against a limited company at your profit level for 2025/26.
Sole trader
£46,111
net take-home
- Income tax
- £11,432
- Class 4 NIC
- £2,457
- Total tax
- £13,889
Limited company
£46,831
net take-home (salary + dividends)
- Corporation tax
- £8,796
- Employer NIC
- £1,136
- Income tax + employee NIC
- £0
- Dividend tax
- £3,237
- Total tax
- £13,169
At £60,000 profit, a limited company keeps about £720 more after tax.
- • The limited-company figure assumes the tax-efficient £12,570 salary plus dividends, and that all profit is extracted.
- • It ignores VAT, pension contributions, the cost of running a company, and other personal income.
- • Employer NIC applies to the salary (a sole director cannot claim the Employment Allowance).
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What the comparison shows
A sole trader pays income tax plus Class 4 National Insurance on all profit. A limited company pays corporation tax (19% to 25%), then you extract the profit via a tax-efficient salary and dividends, which are taxed again personally but usually at lower combined rates once profits are reasonable.
Incorporating tends to win as profits rise, but it adds admin, filing and cost, and the right answer depends on pensions, how much you need to draw, and your wider plans. Treat this as a guide, not advice.
Thinking of incorporating?
We will model your numbers properly and handle the switch end to end. Book a free clarity call with a Chartered Tax Adviser.