Sole trader vs limited company
A free calculator on this year's real rates: corporation tax with marginal relief, the new dividend rates, employer NI, and the director salary points accountants actually use. Put your profit in and your number decides, not the folklore.
Income less expenses, before any tax. The same number either way: what changes is how it is taxed.
The company side assumes the standard setup: a small director salary (the best of £12,570, £6,708 or £5,000 for your number), the rest as dividends, everything taken out. Money left in the company only strengthens the company case.
The dividend rates rose two points in April 2026 and the maths moved for everyone. Landlords have their own version of this question: companies deduct mortgage interest in full and skip the new 2027 property rates. Lekhio runs your real numbers all year, so the answer you see is worked for you, not for the average person in a blog post.
Get the answer on your numbers →A general comparison assuming a single director taking all profit as a small salary plus dividends, 2026/27 rates. It is not advice: pensions, student loans, CIS, IR35, and money left in the company all change the answer, and incorporation has real costs. Lekhio prepares your figures and you always approve them.
The questions behind the number
The calculator gives you the gap. These are the things that decide whether the gap is worth having.
Is it worth going limited in 2026/27?
It depends on profit and on whether you take everything out. Dividend rates rose two points from April 2026 (10.75% basic, 35.75% higher), which narrowed the gap. The advantage grows when profit is left in the company, and shrinks once you add the cost of running one: a company files its own accounts and a Corporation Tax return every year, and somebody has to be paid for that. Run your own number: for many trades under about £30,000 to £40,000 of profit the difference no longer covers the extra cost and admin.
How is a limited company taxed compared to a sole trader?
A sole trader pays income tax plus Class 4 National Insurance on all profit. A company pays corporation tax at 19% on the first £50,000 of profit, with marginal relief taking it to 25% by £250,000, then the director typically takes a small salary plus dividends, which are taxed at the dividend rates. Employer National Insurance applies to salary above £5,000 for a sole director.
Why do landlords consider a limited company?
Companies deduct mortgage interest in full, while individual landlords only get a basic rate credit under Section 24. From April 2027 individuals also pay the new higher property income rates (22%, 42%, 47%), which companies do not. Incorporation has costs and capital gains and stamp duty considerations, so it needs proper advice, but the comparison is sharper than ever.
Does going ltd mean more paperwork?
Yes, and it is worth knowing before rather than after. A sole trader files one Self Assessment a year. A limited company files annual accounts and a confirmation statement at Companies House, a Corporation Tax return with HMRC, and payroll if you take a salary, and your name, your registered address and your accounts sit on a public register that anybody can look up. None of that is hard. All of it is a job somebody has to do every year, and it is the part people forget when they only look at the tax.