Sole Trader vs Limited Company Calculator
Compare take-home pay as a sole trader versus a limited company director for 2025/26. Enter your annual profit to see a side-by-side breakdown of all taxes, National Insurance, corporation tax, dividend tax, and accountant fees — with a clear recommendation on which structure keeps more money in your pocket.
This is an estimate only — always consult a qualified accountant before making structural decisions.
Frequently asked questions
At what profit level does going limited become worthwhile?
As a rough rule of thumb, a limited company structure often becomes tax-advantageous when profits consistently exceed around £30,000–£40,000 per year, after paying a modest director salary. Below this threshold, the additional accountant fees and administrative burden of running a limited company (annual accounts, confirmation statement, Companies House filings) typically outweigh the tax savings. Our calculator shows the crossover point based on your specific profit level.
What are the pros and cons of going limited?
Limited company advantages: lower tax on profits above ~£35k due to the corporation tax / dividend combination; limited liability protects personal assets from business debts; more credible appearance to larger clients; easier to bring in investors or sell the business. Disadvantages: significantly more admin and compliance (Companies House, CT600, annual accounts); higher accountant fees (typically £800–£2,000/yr vs £200–£500 for sole traders); less privacy (accounts are public); less flexible access to profits (must draw via salary or declared dividends).
Does IR35 affect the sole trader vs limited company decision?
IR35 (off-payroll working rules) is relevant if you work through a limited company but the relationship with your client resembles employment rather than genuine self-employment. If your engagement falls inside IR35, your limited company income is taxed as employment income — eliminating the dividend tax advantage and making the limited company structure less beneficial. Contractors in the public sector and large private sector companies are most likely to encounter IR35 assessments. Sole traders are not affected by IR35.
Are there other factors beyond take-home pay I should consider?
Yes — take-home pay is only one factor. Consider: liability protection (a limited company shields personal assets); pension contributions (both structures allow pension contributions that reduce taxable income); mortgage applications (sole trader income can be easier to evidence as it appears on self-assessment); Making Tax Digital requirements; VAT registration thresholds (the same for both); and the long-term flexibility of each structure. Always discuss with a qualified accountant who understands your full financial picture.
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Whether sole trader or limited — InvoiceAdept handles invoicing for both
InvoiceAdept works seamlessly whether you are a sole trader or a limited company director. Send professional invoices, chase payments automatically, and keep your records clean for your accountant.
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