Sole Trader vs Limited Company Calculator 2026/27

How the two are taxed

As a sole trader you pay Income Tax and Class 4 National Insurance on your whole profit, whether you take it out or not. A limited company pays Corporation Tax on its profit after your salary and the employer National Insurance on it. You then pay Income Tax and National Insurance on the salary, and dividend tax on what you take out as dividends. The comparison only works if you add both layers together, which is what the calculator does.

For the company, the calculator can pick the salary for you: it tries every salary from £0 to £50,270 in £500 steps, plus the National Insurance thresholds, and keeps the one that leaves you the most. The salary vs dividends calculator shows that comparison in full.

How we calculate (2026/27 rates)

Income Tax (England, Wales and NI): £12,570 personal allowance, reduced by £1 for every £2 of income over £100,000; then 20% on the next £37,700, 40% up to £125,140 and 45% above. GOV.UK
Class 4 National Insurance: 6% on profit between £12,570 and £50,270, 2% above. Class 2 is treated as paid above £7,105. GOV.UK
Corporation Tax: 19% up to £50,000, 25% from £250,000, and marginal relief at 3/200 in between. Salary and employer National Insurance are deducted first; dividends aren't. GOV.UK
Director's National Insurance, worked out on an annual earnings period: employee 8% between £12,570 and £50,270, then 2%; employer 15% above £5,000. GOV.UK
Employment Allowance: up to £10,500, but not for a company whose director is the only employee paid above £5,000. GOV.UK
Dividend tax: £500 allowance, then 10.75%, 35.75% and 39.35%. Dividends are taxed as the top slice of your income, and the allowance still uses up band space. GOV.UK

It isn't only about tax

Limited liability. A company's debts are its own, so your personal assets are generally protected. Personal guarantees you sign for a bank or landlord put you back on the hook.
Admin and accountancy costs. A company needs payroll, dividend paperwork and a year-end, and most owners pay an accountant for it. The calculator leaves these costs out.
Filing duties. Every year: accounts at Companies House, a Company Tax Return, a confirmation statement and payroll submissions, with automatic penalties when they're late. Directors must also verify their identity with Companies House.
Director rules and IR35. Company money isn't yours to take freely: you take it as salary, dividends from available profits, or a director's loan with its own tax rules. If you work through your company for a client who would otherwise employ you, the off-payroll working rules (IR35) can tax that income like a salary, which removes most of any saving shown here.
Mortgages and borrowing. Lenders often want a track record of accounts or tax calculations, and some look at your salary and dividends rather than the company's profit. If you plan to borrow soon, check with a broker before you switch.

Our guide to sole trader vs limited company in 2026 covers these in more depth, with a worked example, and how to pay dividends explains the paperwork.

Where Ledgers fits

If you go limited, Ledgers keeps the company's books and, from the Starter plan (£29 a month ex VAT), prepares the year-end and the Corporation Tax computation. It works out payroll figures for your salary, but doesn't file RTI submissions, the CT600 or your accounts: you or your accountant file those. See plans or start free and keep your company's books in Ledgers.

Questions people ask

Is a limited company cheaper than being a sole trader in 2026/27?

Not always. If you take all the profit out each year, a company often pays slightly more tax at typical small-business profits, because of Corporation Tax, employer National Insurance on the salary and the higher dividend tax rates from April 2026. At £50,000 profit with a £12,570 salary and no Employment Allowance, a sole trader keeps £1,406.25 more. A company tends to help when you leave profit in it.

What happens to profit I leave in the company?

The company pays Corporation Tax on it: 19% on profits up to £50,000, 25% from £250,000, with marginal relief in between. You pay dividend tax only when you take it out. As a sole trader you pay Income Tax on all your profit, whether you draw it or not.

Can my company claim Employment Allowance?

Not if a director is the only employee paid above the secondary threshold (£5,000 a year). If another employee, or a second director, is paid above it, the company can take up to £10,500 a year off its employer National Insurance.

Does the comparison include accountancy and admin costs?

No. A company usually costs more to run: annual accounts, a Company Tax Return, a confirmation statement and payroll. Those costs narrow any tax saving, so weigh your own quotes against the result.

Does the calculator work for Scotland?

Not fully. National Insurance and Corporation Tax are UK-wide, but Scotland has its own Income Tax bands for salary and sole-trader profit, so the Income Tax lines here are for England, Wales and Northern Ireland.

Estimate, not tax advice. Based on GOV.UK rates for 2026/27, checked October 2026. Income Tax figures are for England, Wales and Northern Ireland; Scotland differs. Take professional advice before you change structure.

Sole trader vs limited company calculator