UK Sole Trader vs Limited Company Calculator

On 2026/27 rates, often the sole trader, if you take all the profit out. A sole trader pays Income Tax and Class 4 National Insurance on the whole profit. Through a company you pay corporation tax first and then tax on your salary and dividends, and for a one-person company with everything paid out those two layers usually take more. A company tends to come out ahead when you keep profit in it or pay into a pension through it, and over some ranges of profit in Scotland or with the Employment Allowance. The chart on this page shows where the two cross on your figures.

For most one-person companies it is £12,570. That is the Personal Allowance and the point where employee National Insurance starts, so you pay no Income Tax or employee NI on it, and it comes off the company's profit before corporation tax. If your other income already uses your Personal Allowance, £5,000 (where employer NI starts) is often better. If the company can claim the Employment Allowance and its profit is over £50,000, a higher salary can win, because each pound of it saves corporation tax at 26.5%. This page tries every salary and picks the one that leaves you the most, so you don't have to guess. A salary of at least £129 a week (the lower earnings limit) also keeps the year counting towards your State Pension.

It takes up to £10,500 a year off the employer National Insurance a business pays. A company can't claim it if the only employee it pays above £5,000 a year (the secondary threshold) is a director. So a one-person company usually can't, but one that also employs someone else above that level usually can. Tick the box only if that is true for your company. This page assumes the allowance covers all the employer NI on your salary; in practice your other staff use some of it.

The first £500 of dividends each year is tax-free (the dividend allowance), shared with any dividends you get from other shares, and any Personal Allowance your salary and other income haven't used covers dividends too. Above that, from 6 April 2026 dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. Dividends are added on top of your other income, so they are taxed at whatever rate is left. No National Insurance is due on them.

A company pays 19% on profits up to £50,000 and 25% on profits over £250,000. In between it pays 25% less marginal relief, which works out at 26.5% on each pound between £50,000 and £250,000. Your salary, the employer National Insurance on it, employer pension contributions and running costs all come off the profit first. The limits are shared out if the company has associated companies, which this page doesn't cover.

No. Profit left in the company after corporation tax can stay there, for example as a cushion, or to be paid out in a later year when more of it falls in the basic rate band. Choose a set amount of dividends to see this: the rest is shown as kept in the company, not as take-home. You pay dividend tax when you do take it out, so keeping it there puts the tax off rather than saving it.

Money the company pays into your pension comes off its profit before corporation tax, and no Income Tax or National Insurance is due on it. A sole trader gets Income Tax relief on personal pension contributions, but no National Insurance relief. This page puts the same amount into your pension both ways, so the take-home figures still compare like with like. Contributions count towards the £60,000 annual allowance.

The best one each way. As a sole trader the only kind is a personal contribution: you pay 80%, your provider adds 20%, and any higher-rate relief comes through your tax return. Through a company, the company pays in directly as an employer contribution, which is usually the cheapest way: there’s no Income Tax or National Insurance on it, and it cuts corporation tax. Salary sacrifice works out about the same. Paying in yourself from your salary or dividends is almost always worse: tax relief on your own contributions is limited to your earnings, and dividends don’t count, so on a typical director’s salary of £12,570 you could get relief on no more than £12,570 a year, and only after paying tax on the money. A pension taken from a job outside the business goes under “Salary from another job”, in “Pension from that job”, with that job’s scheme type.

A company files annual accounts and a confirmation statement with Companies House and a corporation tax return with HMRC, and has to run a payroll for your salary. It needs its own bank account, and most directors pay an accountant. Enter what you expect to spend in the extra yearly costs box: it comes off the company's profit before corporation tax, but it is still money you don't keep.

IR35, the off-payroll working rules, applies when you work through your company in a way that would make you the client's employee if the company weren't there. When a contract is inside IR35, the fees are taxed much like a salary, and most of the saving a company can give disappears. This page assumes your work is outside IR35.

No, not since 6 April 2024. With profits of £7,105 or more Class 2 is treated as paid, so the year counts towards your State Pension at no cost. Below that you can choose to pay £3.65 a week, which this page doesn't include. Class 4 is still due: 6% on profits between £12,570 and £50,270 and 2% above that.

Your salary and sole trader profits are taxed at Scottish rates: 19%, 20%, 21%, 42%, 45% and 48%. Dividends are taxed at the UK rates wherever you live, and National Insurance and corporation tax are the same across the UK. Because Scottish rates on earned income are higher on middle and higher incomes, a company compares better for a Scottish taxpayer, and over some ranges of profit it comes out ahead.

Because of the Personal Allowance. It shrinks by £1 for every £2 of income over £100,000 and is gone by £125,140, so in that band each extra £1 of a sole trader's profit is taxed at about 62% in England, Wales and Northern Ireland (an effective 60% Income Tax plus 2% Class 4 National Insurance) and about 70% at Scottish rates. Through a company the same extra profit pays corporation tax first, and the dividends you take out are taxed at dividend rates, so on the default settings the squeeze takes less: the gap narrows at UK rates and, at Scottish rates, a company can come out ahead. Higher up, the dividends you take out lift your own income over £100,000 too, the company route loses allowance in the same way, and the sole trader usually moves ahead again. The calculator looks for the salary that leaves you with the most each way, which is why the best salary falls at higher profits. So where a company wins is a window of profit, not a general rule, and the chart shades any stretch where it does on your settings.

It can narrow the gap. Repayments are 9% of income over your plan’s threshold, and 6% over £21,000 for a Postgraduate Loan. As a sole trader your whole profit counts, less any pension contributions you make, collected through Self Assessment. Through a company only what reaches you counts: your salary, through payroll, and your dividends, through Self Assessment once your dividends and other unearned income are over £2,000 a year. The company’s running costs, corporation tax and employer National Insurance come off first, and profit kept in the company and employer pension contributions don’t count at all, so a director usually repays less on the same profit. Your other income counts the same either way, after any workplace pension taken from it before tax or by salary sacrifice; a relief at source one comes off at its gross amount. The £2,000 limit is for savings interest and all your dividends together, so the company’s dividends can take savings or dividends from shares over it, and then those count too. HMRC works out the exact figure on your tax return. Choose your plan in the calculator to see the effect; the Student Loan Calculator shows when your loan will be paid off.

It compares one person's tax on the same profit both ways, for 2026/27 or 2025/26. It doesn't cover associated companies, sharing shares or dividends with a spouse, VAT, the High Income Child Benefit Charge, losses, capital allowances, rental income, the cost of setting up or closing a company, the tax due when profit kept in the company is taken out later, or benefits from a job such as a company car. Your salary from another job is assumed to have had the right tax taken through PAYE.