Limited company vs sole trader: which is right for you?

There is no reliable profit threshold that makes a limited company right for everyone. Liability, administration, how you take money, other income, growth plans and the tax rules for the relevant year all affect the decision. Compare both structures using your own figures before changing.

Sole traders are taxed on business profits through Income Tax and National Insurance rules. A limited company is a separate legal person, may pay Corporation Tax, and directors or shareholders can have personal tax obligations on salary, benefits, dividends or loans. Rates and allowances change, so use the current official guidance and obtain advice for your figures.

A limited company means: annual accounts to Companies House, a corporation tax return, a confirmation statement, payroll if you take a salary, and self-assessment for dividends. That's exactly why having an accountant pays for itself many times over.