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CALCULATORS · FREE TO USE · 2026/27 RATES
Sole trader vs limited company - see which structure saves you more tax
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.
2026/27
Current HMRC rates
Free to use
No sign-up required
Every case differs
Results are illustrative
Fixed fee
Agreed on the call
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 - the calculator breaks down how much sits in each band. Traders also pay Class 4 NI at 6% up to £50,270 and 2% above, plus Class 2 NI at £3.45/week above £12,570.
Limited company
The company pays corporation tax on its profits. You take an optimal salary (£12,570) and the remainder as dividends - taxed at lower rates with no National Insurance. The calculator works out the most tax-efficient split automatically based on your pay package.
The pay package slider
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.
HOW TO USE THIS CALCULATOR
Choose your income type
Trading business or landlord rental income
Enter your numbers
Revenue, expenses and any other income
Set your pay package
How much you want to take out of the business
See your results live
Full tax breakdown updates as you type
Your details
Sole trader
Trading income - income tax & Class 4 NI on profits
Limited company
Optimal salary + dividends, corporation tax on profits
Annual saving as Ltd
£0
Effective rate difference
0%
Sole trader effective rate
0%
Ltd company effective rate
0%
Let's talk through your numbers
Fill in your details below - then pick a time and we'll review your numbers before we speak.
We've received your numbers and we're already on it
We're reviewing your calculation so we can hit the ground running. Pick a time below that works best for you - we genuinely look forward to speaking with you and helping you find the structure that works hardest for your situation, so you can keep more of what you earn.
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.
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.
Book a free 20-minute call →COMMON QUESTIONS
Sole trader vs Ltd - your questions answered
Everything you need to know before making a decision.
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 Class 4 and Class 2 NI from the sole trader calculation, which landlords don't pay on rental income. 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.
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
Ready to know if incorporating is right for you?
Pay less tax. Make more money. Free up more time.
Book a free 20-minute call with Bjorgvin. We'll review your current position, run through whether incorporation makes sense for your situation and agree a fixed fee - on the call, not after it.
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Chartered accountants, tax advisors and strategists for UK SMEs and property investors. Based at Halton Mill, Lancaster.
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