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Sole trader vs limited company calculator.
Thinking about incorporating? This calculator shows you exactly how much tax you'd pay under each structure — and whether the saving is large enough to make a limited company worthwhile at your current profit level.
Salary, rental or pension income you receive outside this business. As a sole trader you are taxed on all of it together, so it decides which bands this profit falls into.
How much you would take out of the company in total. We work out the most tax-efficient split between salary and dividends for you — £12,570 is not always it.
2026/27 rates. Everything is calculated in your browser; nothing you type is sent anywhere or stored.
The sole trader figure is the tax on this profit alone, in the bands your other income leaves. The company figure uses the split of your package that leaves you the most after tax, and includes corporation tax on anything left in the business. It does not include the extra cost of running a company, pension contributions or Employment Allowance.
This is a guide, not advice. Your own position depends on details a calculator cannot know — book a free call and we will work through it properly.
The answer
You are keeping £1,195 a year more by staying a sole trader.
As a sole trader you keep £40,268 after tax. Through a company you keep £39,074 — £37,105 in your pocket and £1,969 left in the business, already taxed.
As a sole trader
As a limited company
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Every situation is different. Send your numbers across and Björgvin will review them before your free 20-minute call — so you get answers, in plain English, with clear next steps to help you keep more of what you earn.
What this shows
Understanding the comparison
The calculator runs both scenarios using the same profit figure and shows the full tax picture for each — so you can see exactly where the difference comes from.
Sole trader
Your profit is taxed as personal income. You pay income tax at 20%, 40% or 45% depending on your total earnings. Traders also pay Class 4 NI at 6% up to £50,270 and 2% above. Landlords pay no self-employed National Insurance, but mortgage interest is restricted under Section 24.
Limited company
The company pays corporation tax on its profits. You take a salary and the remainder as dividends — taxed at lower rates with no National Insurance. The calculator works out the split that leaves you the most after tax, based on your pay package. Mortgage interest is deducted in full before corporation tax.
The pay package
Set how much you want to take out of the company in total. The calculator splits this into the optimal salary and dividends for you — and shows how much stays retained in the company, taxed only at the corporation tax rate.
The saving flag
The calculator flags whether the tax saving is large enough to justify the additional costs of running a limited company — typically £800–£1,500+ per year in accounting fees and filing obligations. A small saving may not outweigh the extra complexity.
Your position is unique
The calculator gives you a starting point — not a final answer
Your optimal structure depends on more than just profit. Your other income, mortgage plans, pension contributions, investment plans, property portfolio and long-term goals all affect the right answer. A qualified accountant looks at the full picture and gives you a recommendation built around your situation — not a generic rule of thumb.
Before you incorporate
Things the calculator can't tell you
The tax saving is only part of the picture. These factors can all affect whether incorporating is the right decision — and the right timing for making the switch.
Mortgage applications
Lenders typically assess limited company directors differently from sole traders. Your borrowing capacity may change when you incorporate, particularly if you take a low salary and high dividends. If a mortgage is on the horizon, discuss the timing with your accountant and broker first.
Additional accounting costs
A limited company requires annual accounts, a confirmation statement, a corporation tax return and often payroll. These add cost and complexity — typically £800–£1,500+ per year above sole trader accountancy fees. Factor this into whether the saving stacks up.
IR35 and contractor status
If you work through contracts, IR35 rules may determine how your income is taxed regardless of your structure. Incorporating doesn't automatically solve IR35 — it needs to be reviewed as part of the decision.
Timing and retained profits
If you have retained profits as a sole trader, the timing of incorporation matters. There may be opportunities to extract profits tax-efficiently before or after the switch — worth planning carefully in advance with a qualified accountant.
We handle the full incorporation process
From Companies House registration and HMRC setup to payroll, accounting software and your first set of accounts — we take care of everything so you can focus on running your business.
Common questions
Sole trader vs Ltd — your questions answered
Everything you need to know before making a decision.
Not covered here? Ask us directly — we answer within 1–2 working days.
At what profit level does a limited company become worthwhile?
There's no single answer — it depends on how much you extract, your other income and your personal circumstances. As a rough guide, the tax saving typically starts to outweigh the additional accounting costs somewhere between £30,000 and £50,000 profit, but this varies significantly. Use the calculator to see your specific figure, then speak to a qualified accountant to factor in everything else.
What are the main disadvantages of a limited company?
More administration — annual accounts, confirmation statements, corporation tax returns and often payroll. Higher accountancy fees. More complex mortgage applications for directors. Profits are locked in the company until you choose to extract them. And if you use IR35 contracts, the structure may not provide the tax benefit you expect.
Can I switch from sole trader to limited company at any time?
Yes — there's no fixed point at which you must incorporate. However timing matters, particularly around your tax year end, any retained profits you hold and any upcoming mortgage applications. The earlier you plan the transition, the more options you have.
Does the calculator work for landlords?
Yes — toggle to Landlord income at the top. The calculator removes self-employed National Insurance, which landlords don't pay on rental income, and asks for your mortgage interest so it can apply Section 24. Note that property held in a limited company has specific stamp duty, mortgage and tax implications that go beyond what this calculator captures — a full review is always recommended before making structural decisions around property.
How does Section 24 affect landlords with a mortgage?
As an individual you cannot deduct mortgage interest from your rental profit. You are taxed on the profit before interest, and your tax bill is then reduced by 20% of the interest — restricted to the lowest of the interest, the rental profit, and your income above the personal allowance. If you pay tax at 40%, you are effectively getting relief at 20% on money taxed at 40%. A limited company deducts the interest in full before corporation tax, which is why a mortgaged portfolio often works out better in a company. Whether it is worth moving an existing property is a separate question — stamp duty and capital gains on the transfer can outweigh the annual saving.
Does incorporating affect my mortgage application?
It can — lenders assess limited company directors differently. Many use salary plus dividends to calculate borrowing capacity, which can be lower than the equivalent sole trader profit figure. If you're planning to apply for a mortgage, it's worth discussing the timing of incorporation with both your accountant and mortgage broker before you make the switch.
How quickly can I set up a limited company?
A company can be incorporated at Companies House within 24 hours for around £50. However the practical setup — HMRC registration, payroll, bank account, accounting software and the first set of accounts — takes longer to organise properly. We handle the full setup as part of the engagement.
Get started
Numbers are a start. A conversation is better.
Book a free 20-minute call with Björgvin. We will go through your actual position — the bits a calculator cannot know — and agree a fixed fee on the call.
- Free 20-minute call
- Fee agreed on the call
- No minimum contract
- CIMA & AAT qualified
