Sole trader or limited company calculator

Is it better to be a sole trader or a limited company?

For tax alone, it depends on your profit and how much you take out. With 2026/27 rates, no other income and all the profit taken out, a sole trader in England, Wales or Northern Ireland pays less tax at almost every profit. Leaving profit in a company, or paying into a pension through it, can change that.

What one owner keeps from each profit in 2026/27, taking it all out (England, Wales and Northern Ireland)

Profit	Sole trader keeps	Limited company owner keeps	Difference
£20,000	£18,068.20	£17,174.20 (£12,570 salary)	£894.00 more as a sole trader
£30,000	£25,468.20	£24,403.45 (£12,570 salary)	£1,064.75 more as a sole trader
£50,000	£40,268.20	£38,861.95 (£12,570 salary)	£1,406.25 more as a sole trader
£75,000	£54,811.40	£53,403.69 (£12,570 salary)	£1,407.71 more as a sole trader
£100,000	£69,311.40	£65,209.63 (£12,570 salary)	£4,101.77 more as a sole trader
£150,000	£92,040.40	£85,321.16 (£5,000 salary)	£6,719.24 more as a sole trader

With these settings, a company leaves you more only at profits between £60,142 and £60,506; at other profits up to £300,000 a sole trader keeps more. Each company figure uses the salary that leaves the owner the most, to within £1, with the rest paid as dividends.

What are the main differences apart from tax?

A limited company is a separate legal person, so your own money is usually protected if the business fails, but it files accounts at Companies House, which are public, and a Company Tax Return every year, and needs a payroll to pay you a salary. A sole trader is simpler: one Self Assessment tax return each year.

	Sole trader	Limited company
Tax on the profit	Income Tax and Class 4 National Insurance on all of it	Corporation Tax, then tax on the salary and dividends you take
Who owns the business	You personally	The company, owned by its shareholders
If the business owes money	You are personally responsible	Usually limited to what you put in, unless you give a personal guarantee
Yearly filing	Self Assessment tax return	Accounts at Companies House, a Company Tax Return (CT600), a confirmation statement and payroll reports
Taking money out	Any time, as drawings	Salary through payroll, or dividends from profits; anything else is a director's loan

Can I use this calculator in an AI assistant?

Yes. Taxley runs a free Model Context Protocol (MCP) server, so you can add these calculators to Claude, ChatGPT or your own code and ask for a figure in plain English. The assistant gets the same answer as this page, with a link back to the result. There's no key and no sign-up.

How is a sole trader taxed in 2026/27?

A sole trader pays Income Tax on all the business profit: nothing on the first £12,570, then 20%, 40% and 45%. Class 4 National Insurance is 6% on profits from £12,570 to £50,270 and 2% above. Class 2 is treated as paid from £7,105 of profit, so there is none to pay.

Self-employed National Insurance	2025/26	2026/27
Class 4 on profits between the limits	6% (£12,570 to £50,270)	6% (£12,570 to £50,270)
Class 4 above the upper limit	2%	2%
Class 2 treated as paid from profits of	£6,845	£7,105
Voluntary Class 2 below that, a week	£3.50	£3.65

Sources: GOV.UK: Self-employed National Insurance rates; HMRC: National Insurance rates and allowances; HMRC: Income Tax rates and allowances.

How is a limited company owner taxed?

The company pays Corporation Tax of 19% on profits up to £50,000, rising to 25% above £250,000, with marginal relief in between. You then pay tax on what you take out: a salary carries National Insurance and Income Tax, and dividends above the £500 allowance are taxed from 10.75%.

The salary vs dividends calculator finds the best mix of the two for a company you already have, and the Corporation Tax calculator works out the company's own bill for any accounting period (GOV.UK: Corporation Tax rates).

When does a limited company save tax?

Mainly when you leave profit in the company. Profit kept in the business pays only Corporation Tax, from 19%, while a sole trader pays Income Tax and Class 4 on all the profit whether it is spent or not. Dividend tax is due only when the profit is paid out, which can be in a later, lower-income year.

A company can also pay into your pension with no National Insurance and get Corporation Tax relief: see the limited company pension calculator. Money taken out in other ways becomes a director's loan, and the director's loan s.455 tax calculator shows what that can cost the company.

How does this sole trader or limited company calculator work?

Enter the business profit for the year. The calculator works out a sole trader's Income Tax and Class 4 National Insurance, then the same profit run through a one-owner company that pays out everything: Corporation Tax, employer and employee National Insurance, Income Tax and dividend tax, using the salary that leaves you the most, to within £1.

• Break-even: it checks every profit up to £300,000 at each point where a rate changes, and tells you where a company starts or stops leaving you more.
• Tax years: 2025/26 and 2026/27, with every rate checked against GOV.UK. The company's year is taken as 1 April to 31 March.
• Scotland: Scottish taxpayers answer yes to the Scotland question. Scottish bands apply to trading profit and salary but not to dividends, so the answer can differ a lot (GOV.UK: Scottish Income Tax).
• Left out: the costs of running a company, profit kept in the company, pension contributions, student loans and the High Income Child Benefit Charge.
• Our guide sole trader vs limited company: tax compared works through a full example and the steps to switch, and salary or dividends covers paying yourself once you have a company.

This is general information, not tax advice. A limited company files a Company Tax Return (CT600) and accounts every year, whichever way you pay yourself.

Which rules does this calculator follow?

Every figure comes from the rules HMRC and Companies House publish on GOV.UK, and from the legislation behind them. The links below go to the pages we checked when we last reviewed this calculator, so you can read each rule in full and check that it applies to your company.

• HMRC: Income Tax rates and allowances for current and previous tax years
• GOV.UK: Self-employed National Insurance rates
• HMRC: Rates and allowances for National Insurance contributions
• GOV.UK: Tax on dividends
• HMRC: Rates and thresholds for employers 2026 to 2027
• GOV.UK: Employment Allowance, check if you're eligible
• GOV.UK: Corporation Tax rates and reliefs

Frequently asked questions

Do limited companies pay less tax than sole traders?

Not always. If you take out all the profit each year, a sole trader often pays less in 2026/27: at £50,000 of profit the sole trader keeps £1,406.25 more in this calculator's example. A company saves tax mainly on profit left in the business, because that pays only Corporation Tax until it is paid out.

At what profit is a limited company worth it?

There is no single figure. For 2026/27 with no other income, a one-person company and all the profit taken out: with these settings, a company leaves you more only at profits between £60,142 and £60,506; at other profits up to £300,000 a sole trader keeps more. Other income, Scottish tax, staff or keeping profit in the company all move the answer, so enter your own figures.

Do sole traders pay Class 2 National Insurance?

Not usually. Class 2 contributions are treated as paid once profits reach £7,105 in 2026/27, which protects the State Pension record with nothing to pay. Below that, you can choose to pay voluntary Class 2 at £3.65 a week. Class 4 is still due on profits above £12,570.

Can I take all the profit out of a limited company?

Only as salary, which carries National Insurance, or as dividends paid from profits left after Corporation Tax. A company must not pay out more in dividends than its available profits. Money you take in any other way is a director's loan, which the company reports and may pay section 455 tax on if it isn't repaid in time.

Does a sole trader file a Company Tax Return?

No. A sole trader reports business profits on a Self Assessment tax return. A limited company files a Company Tax Return (CT600) with HMRC and accounts at Companies House every year, and the director may also need a Self Assessment return for salary and dividends, for example when dividends are over £10,000.

Does it matter if I live in Scotland?

Yes. Scottish Income Tax bands apply to a sole trader's profit and to a director's salary, but dividends are taxed at UK rates everywhere. Because Scottish higher rates start lower and are higher, the comparison between sole trader and company can come out differently in Scotland. Answer yes to the Scotland question to see yours.

Related free tools

• Corporation Tax calculator: Estimates the Corporation Tax a UK limited company pays on its taxable profits for one accounting period of up to 12 months. Applies the small profits rate, the main rate and marginal relief, with associated companies, short periods and periods that straddle 1 April. A close investment-holding company pays the main rate on all its profits. Returns the tax, the effective rate and the payment and filing dates.
• Corporation Tax deadline calculator: Works out a UK private limited company's Corporation Tax payment date, CT600 filing deadline and Companies House accounts deadline from its accounting period. Accounts longer than 12 months are split into two Corporation Tax periods, each with its own payment date.
• Corporation Tax late filing penalty and interest calculator: Works out HMRC's penalties for filing a UK company's Company Tax Return (CT600) late — the flat £200/£400 penalties for filing deadlines from 1 April 2026 (£100/£200 before then), and the 10% or 20% tax-geared penalty — plus late payment interest on the Corporation Tax at HMRC's published rates.
• All free Corporation Tax tools

Last reviewed 15 October 2026. This calculator gives general guidance, not tax advice.