Limited Company or Sole Trader Tax Calculator
Compare your tax bill as a Sole Trader versus as a Limited Company - Updated for 2026/27
Using the calculator to estimate your tax bill as a sole trader or a limited company
Our free online limited company tax calculator will help you estimate how much tax you’ll pay on your profits as a sole trader compared to a limited company. Enter your annual profits into the tax calculator to work out if incorporating a limited company might help you to save money (but just remember there might be other reasons why you choose one option over the other!).
The tax calculator should only be used as a guide, and your actual tax bill might be different depending on your circumstances. To give you an idea of what tax as a sole trader looks like in comparison to a limited company, the calculator assumes:
- Figures are based on a full tax year
- You are the only employee and director of the company
- You take a salary up to the National Insurance (NI) Primary threshold of £12,570 (so although the company will pay NI as an employer, it can offset this and the salary cost against your bill for Corporation Tax)
- You do not have any other income
The profit amount you can enter is limited to £50,000, which is the basic rate tax threshold, so you won’t be able to use it for higher profit amounts. This is because it’s often more tax efficient to form a limited company over this threshold – but not always! It all depends on your situation.
You can discuss this in more detail with your accountant directly, or talk to one of our advisers today by calling 020 3355 4047 or by pressing the Live Chat button.
Should I be a sole trader or set up a limited company?
The calculator will give you a side-by-side overview of which business structure is likely to be more tax efficient, but there might be other points to consider before you make any big decisions!
As well as comparing your take home pay as a sole trader versus setting up a limited company, it’s useful to think about things like risk, the admin involved, protecting personal assets, and privacy. If you’re already trading as a sole trader and you’re thinking of switching, or if you’re not sure whether to incorporate a limited company straight away, there are lots of variables.
We go into it all in more detail in our article about the differences between sole traders and limited companies.
FAQs
Sole traders do start paying tax at a higher rate than limited companies, but this can vary depending on how much profit your business makes, as well as any other income you might have. Choosing one business structure instead of another isn’t just about tax efficiency though, and there might be other important points to consider, such as personal liability!
Being a sole trader means there’s no legal distinction between you and the business, so although you’re ‘self-employed’, you can’t ‘employ yourself’. You’ll pay income tax on any profits you make, even if you don’t use them personally.
Company directors can take a salary and dividends if that’s more tax efficient. You can use our dividend tax calculator to work out the tax you’ll pay on dividends and other income.
Our tax comparison calculator shows how much tax you will pay on your profits, assuming you don’t have other income.
Earnings from somewhere else, such as an employer or property, will affect things like your tax-free allowance, which the calculator won’t show.
If you need more detailed information, then please talk to your accountant or one of the team by calling 020 3355 4047 or open a Live Chat.
Earning profits above £50,000 can often mean it’s more tax efficient to operate as a company rather than as a sole trader, but with lots of other factors to consider you should consult your accountant before deciding anything! They’ll be able to help you work out what suits you best, and advise what other options are available.
A limited company is a separate legal entity to the people who own and manage it, whereas sole traders are the business.
This is a key consideration which affects everything from how you pay yourself, to how you’re taxed, and who is liable if the business fails. It’s quite a complicated point, so we go into more detail about business structures in this article.
Looking for more information?
We have a comprehensive range of free resources available
Corporation Tax for Limited Companies Guide
Learn everything you need to know about Corporation Tax for Limited Companies.
3 minutes
Income Tax and National Insurance for Sole Traders Guide
Learn all you need to know with our guide.
4 minutes
Quick Tax Saving Tips Guide
Our guide to helping you and your business save money and operate in the most tax efficient way possible.
2 minutes
