Compare net take-home from both business structures using matched assumptions: revenue, expenses, region and accountant fees.
Updated for 2025/26 · Reviewed by James Whitfield · Methodology and assumptions
Sole trader route currently looks stronger on net take-home under these assumptions.
Model both business structures with matched assumptions so you can compare net take-home on a like-for-like basis.
Enter annual revenue, business expenses and accountant fees to define your real taxable base.
Review sole trader net income versus limited company net income under the same region and tax-year assumptions.
Use annual and monthly difference figures to decide whether incorporation is worthwhile at your current level.
Sole trader: Net profit (revenue minus allowable expenses) is taxed directly as income, applying the same income tax bands as employment income. On top of income tax, you pay Class 4 National Insurance: 6% on profits from £12,570 to £50,270, and 2% on profits above £50,270. Class 2 NI (£3.45/week for 2025/26) also applies if profits exceed £12,570. There is no employer NI, no corporation tax, and no dividend extraction step.
Limited company: The company pays corporation tax on its profits before extraction. For 2025/26, the small profits rate is 19% on profits up to £50,000, the marginal relief rate is 26.5% on profits from £50,001 to £250,000, and the main rate is 25% on profits above £250,000. After corporation tax, the director typically takes a low salary (often around the personal allowance or NI secondary threshold) and the remainder as dividends. Dividends are taxed at 8.75% (basic rate), 33.75% (higher rate) or 39.35% (additional rate) — with the first £500 tax-free. No employee NI applies to dividends.
The net tax saving from a limited company comes from: (a) paying corporation tax at 19–25% on profits rather than income tax at 20–45%, (b) paying dividend tax rather than income tax on the extracted profit, and (c) avoiding employee NI on the dividend element. This saving is partially offset by accountant costs and the additional compliance burden of running a company.
The crossover point depends on profit level and assumptions, but as a general benchmark: at profits of £25,000–£30,000, the tax saving from going limited is typically small (£500–£1,500) and may not justify accountant fees of £1,000–£2,000 per year. At £40,000–£50,000 profit, the saving becomes more material (£2,000–£4,000) and incorporation is commonly cost-effective. Above £60,000, the saving is typically £5,000 or more per year and the case for a limited company is usually straightforward.
| Annual profit | Typical sole trader tax | Typical Ltd company tax | Approx. annual saving |
|---|---|---|---|
| £30,000 | ~£5,500 | ~£4,200 | ~£1,300 |
| £50,000 | ~£12,400 | ~£9,100 | ~£3,300 |
| £75,000 | ~£22,900 | ~£16,800 | ~£6,100 |
| £100,000 | ~£34,400 | ~£24,500 | ~£9,900 |
Estimates assume standard personal allowance (1257L), no pension, England/Wales rates. Limited company assumes minimum salary at secondary NI threshold plus remaining profit extracted as dividends. Use the calculator above for precise figures based on your actual inputs.
This calculator provides planning estimates only. For an incorporation decision, seek advice from a qualified accountant familiar with your specific circumstances. Reviewed by James Whitfield.