Limited companies
6 min read
· Updated
August 2026
Sole trader or limited company?
The real differences in tax, paperwork and risk, and when switching starts to pay.
There's no profit figure where a limited company suddenly becomes the right answer. It depends on how much you take out of the business, what else you earn and how much paperwork you're willing to live with.
How you're taxed
As a sole trader you pay income tax and National Insurance on all your profit, whether you spend it or not. A company pays corporation tax on its profit, and you pay yourself through a small salary and dividends.
The paperwork
A company files accounts at Companies House, a corporation tax return, a confirmation statement and payroll for its directors. Your accounts are public. It's more work, and our fees are higher for it.
When it's worth a look
If your profits are comfortably above what you need to live on, a company can save tax. Below that, the extra costs often cancel out the savings. We'll run your real numbers both ways in a free consultation.
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This guide is general information, correct when it was last updated. Tax rules change and every situation is different, so please don’t act on it without talking to an accountant.
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