- As a rough guide, a limited company starts to win on tax once profits comfortably exceed what you need to live on, because you can leave profit in the company and control how you extract it. Below roughly £30,000 to £40,000 of profit, a sol...
Try it yourself
In detail
The decision is part tax, part admin, part risk.
On tax, a sole trader pays income tax and Class 4 National Insurance on all profit as it arises. A limited company pays Corporation Tax, then you choose when and how to extract profit as salary or dividends, which gives you control and can defer tax. That control matters most when your profit is more than you need to draw, so you can leave some in the company.
On admin and cost, a company means Companies House filings, annual accounts, a Corporation Tax return and usually an accountant, so there is more to do and pay for. On risk, a limited company gives limited liability, separating your personal assets from the business.
Compare the take-home both ways with the sole trader tax calculator and our self-employed take-home guide, then weigh the admin. There is no single threshold that fits everyone.