Guide
Sole trader or limited company?
A sole trader and a limited company are taxed differently. A sole trader pays Income Tax and National Insurance on profit. A company pays Corporation Tax on its profit, and you pay tax again when you take salary or dividends.
Step by step
- 1Compare the profit you expect with the extra admin of a company
- 2Remember a company is a separate legal person, with its own books
- 3Budget for accounts, a confirmation statement and Corporation Tax
- 4Check the current rates on GOV.UK before you decide
Common mistakes
- Assuming a company always means less tax
- Mixing company money with personal money
- Forgetting the cost of accounts and filings
Related guides
Last checked against GOV.UK: 28 October 2026. Tax year 2026/27.
Not affiliated with HMRC. General information, not professional tax advice. Check GOV.UK or speak to a qualified adviser for your situation.