Indietax

Ltd Company vs Sole Trader Tax Comparison 2026/27

Updated for the 2026/27tax year · Last updated

Enter your annual profit to see a side-by-side tax comparison between a limited company and sole trader. The limited company calculation uses a director salary of £12,570 plus the remaining post-tax profits paid as dividends.

Limited company

£47,670

take-home

Sole trader

£46,112

take-home

Operating via a limited company saves you £1,558/year.
TaxLtdSole
Corporation tax£9,012—
Income tax£3,318£11,431
Class 4 NI—£2,457
Total tax£12,330£13,888

Ltd assumes director salary of £12,570 (NI-free threshold) and remaining profits as dividends. Excludes accountancy costs (typically £1,000–£2,500/year for a ltd company).

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How this calculator works

Sole trader: income tax and Class 4 NI are charged directly on profits using the 2026/27 rates. No corporation tax applies.

Limited company: the company pays corporation tax on profits after the director salary. The remaining after-tax profits are paid as dividends. The director pays income tax on the salary (nil, as it equals the personal allowance) and dividend tax on the dividend income above the £500 allowance.

Frequently asked questions

The crossover point varies by individual circumstances, but generally a limited company starts to offer meaningful tax savings above around £30,000–£35,000 profit. Below this, the accountancy costs (typically £1,000–£2,500/year) often outweigh the saving.
Administration burden: annual accounts, Corporation Tax return, Confirmation Statement, and VAT returns if registered. Accountancy costs are higher. You must keep company and personal finances strictly separate. There may be additional compliance if you take on staff.
Yes, but it's a significant change. You'll need to incorporate, open a business bank account, notify HMRC, and potentially transfer assets. Most people do this at the start of a new tax year for simplicity. Get advice from an accountant before switching.
No. The calculator shows the pure tax difference. In practice, a limited company typically costs £1,000–£2,500/year more in accountancy fees than a sole trader setup. Deduct this from the 'saving' to get your real benefit.

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