Sole Trader vs Ltd Co Calculator

Three back-to-back tax changes shifted the equation. Class 4 self-employed NI dropped from 9% to 6% in April 2024, making sole trader status cheaper. Employer NI rose from 13.8% to 15% AND its Secondary Threshold dropped from £9,100 to £5,000 in April 2025, hitting any Ltd Co paying a director salary. Dividend ordinary rate rose 8.75% to 10.75% and the upper rate rose 33.75% to 35.75% in April 2026. The combined effect: the old "incorporate above £30k profit" rule of thumb no longer holds.

Since April 2025 there is no longer an "NI-free" salary option. The Employer Secondary Threshold dropped from £9,100 to £5,000, so a £9,100 salary triggers £615/year of employer NI and a £12,570 salary triggers £1,135/year. The £12,570 salary still usually wins because the income tax saved on the dividend distribution is greater than the employer NI cost. Always run the numbers for your exact profit level.

No - it compares pure tax outcomes only. A typical UK Ltd Co accountant charges £80-£150/month for full bookkeeping, payroll, and filings. A sole trader accountant typically costs £25-£60/month for similar service. If the take-home advantage of Ltd Co is less than the £600-£1000/year extra accountancy bill, sole trader is the better choice.

Non-tax reasons that still favour incorporating: limited liability protection from business creditors, professional credibility for B2B clients, the ability to retain profits inside the company (paying CT but not personal tax) for future investment, and pension contributions from the company that exceed personal limits. If you want any of these, the take-home maths is a secondary consideration.

If you contract through a Ltd Co and your engagement is inside IR35, your client must apply PAYE to your fees and the Ltd Co structure provides almost no tax advantage over being on payroll directly. This calculator assumes a genuinely independent business outside IR35. If you are contracting, use the IR35 calculator instead.

Maybe. If the calculator shows sole trader saves you meaningful money at your current profit, the move is mechanically straightforward: stop trading through the Ltd Co, register as a sole trader, and ultimately strike off the company or hold it dormant. Watch out for the Members Voluntary Liquidation route if you have retained profits over about £25k - it can be very tax-efficient via Business Asset Disposal Relief at 10%.

Yes - the Personal Allowance (£12,570), higher-rate threshold (£50,270), and additional-rate threshold (£125,140) are all frozen until April 2028. With wage growth and inflation, more sole traders and director-shareholders will drift into higher bands each year. This is sometimes called fiscal drag and is the biggest stealth tax in UK personal finance.