Sole trader vs limited company calculator
Enter your profit and how much you would take out each year. The calculator compares a sole trader with a limited company on 2026/27 rates and shows the profit at which a company starts to come out ahead.
A limited company leaves you better off by
£2,601 a year
With these settings a company starts to come out ahead at about £64,000 of profit.
| Sole trader | Limited company | |
|---|---|---|
| Income tax | £19,432 | £0 |
| National Insurance | £2,857 | £1,136 |
| Corporation Tax | £0 | £13,553 |
| Dividend tax | £0 | £3,999 |
| Total tax | £22,289 | £18,688 |
| Extra running costs | £0 | £1,000 |
| Cash in your pocket | £57,711 | £46,271 |
| Left in the company | £0 | £14,041 |
| Pension | £0 | £0 |
| Total you keep | £57,711 | £60,312 |
The £14,041 left in the company has paid Corporation Tax only. Dividend tax will be due if you take it out later, unless you draw it in a year when you have room in a lower band.
Same settings at other profit levels
| Profit | Sole trader keeps | Company keeps | Better |
|---|---|---|---|
| £30,000 | £25,468 | £23,681 | Sole trader |
| £50,000 | £40,268 | £38,139 | Sole trader |
| £75,000 | £54,811 | £56,637 | Company |
| £100,000 | £69,311 | £75,012 | Company |
| £150,000 | £92,040 | £111,762 | Company |
Tax is only part of the decision. A company gives limited liability and can look more established to clients, but means more filing, public accounts and stricter rules on taking money out.
Figures used, 2026/27
- Sole trader: income tax 20%, 40% and 45%; Class 4 NI 6% and 2%
- Company: salary up to £12,570, employer NI 15% above £5,000, Corporation Tax 19% to 25%
- Dividends 10.75%, 35.75% and 39.35% after a £500 allowance
- Pensions: company contributions free of Corporation Tax and NI; sole trader contributions get income tax relief only
- Retained profit shown after Corporation Tax; dividend tax on later withdrawal not included
England, Wales and Northern Ireland. Rates reviewed . An estimate, not advice: your own position may differ.
How the calculator works
As a sole trader you pay income tax and Class 4 National Insurance on all of your profit, whether you spend it or not. The calculator applies the 12,570 pound personal allowance, the 20%, 40% and 45% bands, and Class 4 NI at 6% and 2%.
For the company, it pays you a salary up to the 12,570 pound personal allowance, adds employer's National Insurance, charges Corporation Tax on what is left at 19% to 25%, and pays dividends up to the amount you choose to take out. Dividends are taxed at 10.75%, 35.75% and 39.35% after the 500 pound allowance. Anything you do not take out stays in the company having paid Corporation Tax only.
The key result for 2026/27 is that a company no longer saves tax if you take every pound out. Corporation Tax followed by higher dividend tax now costs slightly more than income tax and National Insurance on the same profit. A company only wins when you leave profit in the business, which is why the calculator asks how much you need to live on.
Leaving profit in a company is not the same as saving it for ever. If you take it out later as dividends, dividend tax becomes due then, though possibly at a lower rate if you draw it in a year with spare basic rate band. Retained profit can also fund equipment, a pension or a larger salary in quieter years.
Pension contributions are compared fairly. Paid by the company they avoid Corporation Tax and National Insurance; paid personally by a sole trader they get income tax relief but not National Insurance relief. The extra cost of running a company, such as accountancy and Companies House fees, is deducted from the company's side.
Frequently asked questions
On 2026/27 rates there is no single figure. If you take all the profit out, a company does not save tax at any level. If you take out 50,270 pounds a year and leave the rest in the company, it starts to come out ahead at around 64,000 pounds of profit, including 1,000 pounds a year of extra running costs. Enter your own figures above.
If you need all of the profit to live on, being a sole trader is usually cheaper, both in tax and in running costs. A limited company becomes cheaper when profit is comfortably above what you need, so that some can stay in the company at Corporation Tax rates, or when you want to make large pension contributions.
Dividend tax rates have risen in stages since 2016, the dividend allowance has fallen from 5,000 to 500 pounds, Corporation Tax rose to 25% for larger profits in 2023, and employer's National Insurance went up to 15% in 2025. Each change eroded the saving, and on 2026/27 rates it has gone for anyone drawing out everything.
Limited liability, which protects personal assets if the business fails; credibility with larger clients, some of whom only contract with companies; the ability to bring in shareholders or investors; and flexibility over when you take income. Against that, company accounts are public, there is more filing, and you must follow rules on dividends and director's loans.
Yes. You set up the company, transfer the business, and file a final sole trader Self Assessment for the period up to the transfer. Assets such as equipment, goodwill or vehicles need valuing, and there can be capital gains or VAT points to manage. We handle the whole switch for clients, including telling HMRC and moving your bookkeeping.
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