Sole trader vs limited company calculator 2026/27
The big question for a growing business: stay a sole trader, or incorporate? Enter your annual profit to compare what you would take home each way for 2026/27, after every tax.
Sole trader
self-employed- Income Tax
- −£11,432
- Class 4 NI
- −£2,457
Take-home
£46,111
Limited company
salary + dividends- Corporation Tax
- −£8,796
- Dividend tax + employer NI
- −£5,113
Take-home
£46,091
Staying a sole trader keeps £20 a year more at this profit.
Verified · 2026/2721 June 2026
England, Wales & NI. Limited-company assumptions: single director, £12,570 salary, dividends for the rest, no other employees, £0 extra expenses or accountancy. Dividends are taxed at UK-wide rates, so a Scottish taxpayer’s company figure is the same.
How this was calculated
At the same business profit we calculate take-home two ways. As a sole trader: Income Tax plus Class 4 National Insurance on the whole profit. As a limited company: a £12,570 director’s salary, employer NI on it, Corporation Tax (19% to 25% with Marginal Relief) on the remaining profit, then dividend tax (with the £500 allowance) on what is paid out. The difference is the tax saving — or cost — of incorporating at that profit. Rates are traced to dated gov.uk sources for 2026/27.
The full method and every source is on our methodology page.
Built & maintained by the Pay Packet team · methodology sourced from HMRC · last reviewed 21 June 2026. About our figures →
Two ways to be taxed on the same profit
As a sole trader the whole profit is yours and taxed as personal income — Income Tax plus Class 4 National Insurance. Simple, but every pound of profit is taxed whether you spend it or not.
A limited company is a separate legal person. It pays Corporation Tax (19% up to £50,000 of profit, rising to 25% by £250,000) on its profit, and you then draw money out as a small salary plus dividends, which carry their own tax. The classic efficiency comes from dividends avoiding National Insurance — but in 2026/27 that edge is narrower than it was, because dividend rates went up by 2 points and a company now pays 15% employer NI on the director’s salary.
The result, as the figures above show, is that incorporating tends to win only once profit is comfortably into the higher-rate territory, and even then by less than people expect — before you weigh accountancy costs and admin. To dig into the company side, use the limited company tax calculator; for the sole-trader side, the sole trader tax calculator. Contractors weighing this through an agency should also see the umbrella vs limited calculator.
Rates are from gov.uk: Corporation Tax, dividends and self-employed NI.
Sole trader vs limited company questions
- Which is better, sole trader or limited company?
- It depends on your profit and your plans. At lower profits a sole trader is usually simpler and the take-home is similar or better. As profit rises a limited company can keep more, because profit is taxed through Corporation Tax and dividends rather than Income Tax and Class 4 NI — though the gap has narrowed since employer NI rose to 15% and dividend tax rose by 2 points in April 2026. This tool shows the difference at your figure.
- Why is the limited-company advantage smaller than it used to be?
- Two 2026/27 changes eat into it: dividend tax rose to 10.75% (basic) and 35.75% (higher), and employer National Insurance is now 15% above a £5,000 threshold, which a one-person company pays on the director’s salary. Corporation Tax of 19–25% then applies before profits can be paid as dividends. The structure still wins at higher profits, but by less.
- What assumptions does the comparison make?
- The limited-company figure assumes a single director on a £12,570 salary taking the rest as dividends, no other employees (so no Employment Allowance), and £0 extra expenses. The sole-trader figure taxes the whole profit as self-employment income. Real outcomes depend on how you pay yourself, pension contributions, retained profit and accountancy costs.
- Are there non-tax reasons to incorporate?
- Yes — limited liability, credibility with some clients, and the ability to retain profit in the company are common reasons, while a company brings more admin, accounts, and public filings at Companies House. Tax is only part of the decision; take advice before incorporating.
An estimate for the 2026/27 tax year — guidance, not personal tax, accountancy or legal advice. The right structure depends on far more than this year’s tax; take advice before incorporating. Figures use standard assumptions stated above and a standard Personal Allowance.