Sole Trader vs Limited Company Optimizer
Compare your net take-home income as a sole trader against running a limited company, based on your expected revenue and expenses.
Your business
If you ran a Ltd company
Defaults to £12,570.00 (the full Personal Allowance). There's no single "correct" figure — some directors set it lower, around the Employer NI threshold, to avoid employer NI entirely. Adjust it to compare.
Net Profit: £80,000.00
Sole Trader
Limited Company
Sole Trader leaves you with £1,946.52 more per year, based on these figures.
This comparison covers Income Tax, National Insurance, Corporation Tax and Dividend Tax only. It doesn't include the cost of running a limited company beyond what you've entered (accountancy, confirmation statement fees, etc.), pension planning, or the value of limited liability protection — all of which can matter as much as the tax outcome. Figures use 2026/27 rates and assume you have no other income. Always confirm your decision with a qualified accountant.
How the comparison works
As a sole trader, your net profit is taxed directly through Income Tax and Class 4 National Insurance — there's no separate business-level tax. As a limited company director, you typically take a mix of a modest salary (which is a deductible company expense) and dividends from what's left after Corporation Tax. Dividends are taxed at lower rates than salary, but they're paid from profit that's already been taxed once at the company level — and 2026/27 dividend tax rates are notably higher than in previous years following recent Budget changes.
There's no single right salary level for a director — some set it to the full Personal Allowance (£12,570) to use up the tax-free band, while others set it lower to sit below the Employer National Insurance threshold (£5,000) and avoid that cost entirely. This tool lets you adjust the salary to see how it changes the outcome, rather than assuming one approach is correct for everyone.
If you decide to run a limited company, see our guide on extracting profits tax-efficiently, and how director's loan accounts are taxed if you borrow from the company.