Should you operate as a sole trader or set up a limited company? Enter your business profit below and this calculator shows your take-home pay under both structures side by side. At higher profit levels, the limited company route can save you thousands per year — but the crossover point depends on your specific situation.
Enter your business profit
As a sole trader, your business profit is taxed as personal income: Income Tax at 20/40/45% after the Personal Allowance, plus Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above. Admin is simple — just a self assessment return.
A limited company pays Corporation Tax on profits (19% under £50k, up to 25% above £250k). You extract income as a director's salary (typically £12,570) plus dividends from post-tax profits. Dividends are taxed at lower rates (8.75%/33.75%/39.35%) after a £500 dividend allowance. The company also pays employer NI on the salary.
Below about £30,000-£35,000 profit the admin overhead of a limited company often outweighs the tax savings. Above £50,000 profit the limited company route usually saves significantly because Corporation Tax plus dividend tax is often less than Income Tax at 40% plus Class 4 NI.
Profits under £50,000 pay 19%. Profits between £50,000 and £250,000 get marginal relief (effective rate 19-25%). Profits over £250,000 pay 25%.
Many accountants recommend £12,570 — using the Personal Allowance, building State Pension years, and avoiding Income Tax. Employer NI of 15% applies on salary above £5,000, offset by the Employment Allowance if eligible.
After the £500 dividend allowance: 8.75% basic, 33.75% higher, 39.35% additional rate.
Annual accounts, Corporation Tax return, and typically an accountant (£500-£2,000/year). Filing fees and proper record-keeping are also required.
Yes. 6% on profits between £12,570 and £50,270, and 2% above. Class 2 NI has been effectively eliminated for most self-employed from April 2024.
