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✦ Free UK calculator · 2026/27 rates

Sole trader or limited company: the tax both ways

Put in your pay and your business profit. This works out what you would keep this year as a sole trader and through a limited company, on 2026/27 rates, and shows the working for both. It does not pick one for you. The right structure depends on things a sum cannot see, and an accountant can look at those with you.

Your income and your business, 2026/27
All figures in £ for the tax year. Updates as you type.
£
£
£
Company options everything taken out, no salary, no pension
£
Blank means everything left after corporation tax.
£
£
As a sole trader
What you keep this year
£0
of £0 profit
Show the working
    Through a limited company
    What you keep this year
    £0
    of £0 profit
    Show the working
       
      Where your adjusted net income lands

      Your pay, plus the profit (sole trader) or the salary and dividends you take (company), plus other dividends. Several tax rules switch on at these lines. Personal pension contributions and Gift Aid would lower it; they are not included here.

      LineSole traderCompany
      What these figures leave out
      • Accountant fees and the cost of running a company (accounts, the confirmation statement, payroll, a business bank account). None are included.
      • Limited liability. A company is a separate legal person, so its debts are generally its own. A sole trader and the business are the same person.
      • A company can only pay dividends out of profits it has made, after corporation tax. Checking that is the directors' responsibility.
      • Money left in the company belongs to the company, not to you, until you take it out. It is taxed then, at that year's rates, which may differ from 2026/27.
      • IR35. If the work is really employment, through your own company, different rules apply and the company figures here would not hold.
      • Class 2 National Insurance is no longer payable. A sole trader profit over £7,105 counts towards your State Pension automatically.
      • Making Tax Digital. Sole traders and landlords with over £30,000 of qualifying income before expenses in 2025/26 must use it from April 2027; over £20,000 in 2026/27, from April 2028.
      • The £1,000 trading allowance. With very small trading income, you can take £1,000 off instead of your actual expenses, and income of £1,000 or less does not need reporting.
      • The Employment Allowance cannot be claimed by a company whose only employee paid over £5,000 is its director, so it is not used here.
      • Associated companies divide the £50,000 and £250,000 corporation tax limits. Set the number in Company options.

      An accountant can confirm the right answer for your situation.

      ⓘ Uses 2026/27 rates: personal allowance £12,570, tapering above £100,000 of adjusted net income; income tax bands for England, Wales and Northern Ireland or for Scotland on earnings; dividend tax at 10.75%, 35.75% and 39.35% on UK bands everywhere, after the £500 allowance; Class 4 National Insurance at 6% and 2%; employee National Insurance at 8% and 2%; employer National Insurance at 15% over £5,000; corporation tax at 19% to £50,000 and 25% from £250,000, with marginal relief between. One tax year only. These are facts and arithmetic, not financial or tax advice, and not a recommendation of either structure.
      ✦ How it works

      How each route is taxed

      As a sole trader, the business and you are the same person for tax. The profit is added to your other income and taxed as yours: income tax at your rates, on top of your pay, plus Class 4 National Insurance at 6% on profit between £12,570 and £50,270 and 2% above. You pay it all through Self Assessment, whether you spend the money or leave it in the bank.

      Through a limited company, the company is taxed first. It pays corporation tax on its profit: 19% up to £50,000, 25% from £250,000, and a rate in between with marginal relief. What is left belongs to the company. You pay tax only on what you take out. A salary is a cost to the company, with employee and employer National Insurance on it above their thresholds. Dividends come out of profit that has already paid corporation tax, and they are taxed on you at 10.75%, 35.75% or 39.35% after a £500 allowance. Dividends carry no National Insurance.

      If you have a job, it matters where the extra income lands. Your pay fills your personal allowance and the basic-rate band first, so anything from the business sits on top of it.

      Worked example: a £41,000 job and £10,000 of profit

      England, 2026/27, everything taken out of the company as dividends in the same year, no salary or pension from the company.

      Sole traderLimited company
      Business profit£10,000£10,000
      Corporation tax at 19%None£1,900
      Income tax on the profit£2,146None
      Class 4 National Insurance£0None
      Dividend tax on £8,100None£817
      Total tax£2,146£2,717
      What you keep£7,854£7,283

      The job uses the whole £12,570 personal allowance and £28,430 of the £37,700 basic-rate band. As a sole trader, the first £9,270 of profit is taxed at 20% (£1,854) and the last £730 at 40% (£292). The profit is under £12,570, so there is no Class 4. Through the company, corporation tax takes £1,900, leaving £8,100 to pay out. The first £500 is covered by the dividend allowance and the other £7,600 all fits in the basic-rate band at 10.75%, which is £817. On these figures the sole trader keeps £571 more.

      The same job with £30,000 of profit

      As a sole trader, income tax is £10,146 (£9,270 at 20%, then £20,730 at 40%) and Class 4 is £1,046, so you keep £18,808. Through the company, corporation tax is £5,700 and £24,300 is paid out, with £6,316 of dividend tax because most of it lands in the higher-rate band at 35.75%. You keep £17,984. The gap is £824 this year.

      If the company paid out only £9,270, the dividends would stay in the basic-rate band and cost £943 in tax. You would keep £8,327 this year and £15,030 would stay in the company. That money has paid corporation tax but not yet dividend tax, which is due in whichever year it comes out, at that year's rates. That is why the calculator shows what is left in the company separately rather than adding it to what you keep.

      What the sum cannot tell you

      A one-year comparison leaves out the cost of running a company, the protection of limited liability, how long you expect the business to last, what your income will be in the years you take money out, and rules such as IR35. Those can matter as much as the tax. The calculator above lays out the arithmetic for your figures; an accountant can put it together with the rest.

      Related calculators
      Dividend tax Adjusted net income Child Benefit charge Salary sacrifice pension All free tools
      ✦ Questions

      Doing a tax return? Sole trader profit and dividends over £10,000 go on your return. The UK Self Assessment guide has the deadlines, who has to file and how payments on account work.

      Sole trader or limited company: FAQ

      Is a limited company more tax efficient than being a sole trader?
      It depends on the figures, not the structure. It turns on your profit, your other income, how much you take out of the company and in which year, and what it costs to run a company. On 2026/27 rates, with everything taken out in the same year, the sole trader figure comes out higher in many English cases, because corporation tax and dividend tax together can cost more than income tax and Class 4 National Insurance. In Scotland earnings are taxed at Scottish rates but dividends are not, which can move the comparison the other way. Money left in the company changes the picture again, because only corporation tax has been paid on it so far. Try your own figures above.
      What if I'm employed and have a side business?
      Your pay uses your personal allowance and tax bands first. Business profit, or anything you take out of a company, sits on top of it, so it is taxed at your top rate. On a salary of £41,000, the first £9,270 of sole trader profit is taxed at 20% and the rest at 40%. Class 4 National Insurance is worked out on the profit alone, so the first £12,570 of profit pays none, whatever your salary.
      Can I pay myself a salary from my company if I already have a job?
      Yes. National Insurance is worked out separately for each job, so a salary of up to £12,570 from your company pays no employee National Insurance even if you have another job. Income tax is different: your main job has already used your personal allowance, so the company salary is taxed at your normal rate. The company pays 15% employer National Insurance on salary over £5,000, and it cannot claim the Employment Allowance if you, as a director, are its only employee paid over £5,000. A salary is a cost to the company, so it reduces corporation tax.
      What is marginal relief?
      Corporation tax is 19% on profits up to £50,000 and 25% on profits of £250,000 or more. In between, the company pays 25% less marginal relief of 3/200 of the gap between its profit and £250,000. On £100,000 of profit that is £25,000 less £2,250, so £22,750 of corporation tax. Each extra pound in that range is taxed at 26.5%. The £50,000 and £250,000 limits are divided by the number of associated companies plus one.
      What happens to money I leave in the company?
      It belongs to the company, not to you. The company has paid corporation tax on it, and it becomes yours when it is paid out, usually as a dividend. You pay dividend tax then, at the rates and bands of the year you take it, which may be different from this year. A company can only pay dividends out of profits it has made, and checking that is the directors' responsibility.
      Do sole traders still pay Class 2 National Insurance?
      No. Class 2 is no longer payable. If your profit is over £7,105 in 2026/27, the year counts towards your State Pension automatically. Below that, you can choose to pay voluntary Class 2 to protect the year. Class 4 is still due at 6% on profit between £12,570 and £50,270 and 2% above.
      Do I need to register for Self Assessment?
      As a sole trader, you need to register if your trading income before expenses is over £1,000 in a tax year. The deadline to register is 5 October after the end of the tax year you started in. Through a company, the company registers for corporation tax and files its own return, and you need a Self Assessment return if your dividends are over £10,000 in a year or you have other income that has not been taxed.
      When does Making Tax Digital start for sole traders?
      From April 2027 if your qualifying income from self-employment and property, before expenses, was over £30,000 in 2025/26. From April 2028 if it was over £20,000 in 2026/27. It means keeping digital records and sending HMRC quarterly updates through compatible software. It applies to sole traders and landlords, not to limited companies.
      Go deeper: a WealthR Playbook
      The UK High Earner's Tax Playbook covers the 60% band, the £100,000 childcare cliff, the pension allowances and salary sacrifice, in plain English with worked examples. £19.99, or free with Pro →