Sole trader or limited company?
The structure should fit your business, not just a headline tax rate. Compare the responsibilities, then talk through the numbers and the level of support you want.
| Sole trader | Limited company | |
|---|---|---|
| Legal status | You and the business are the same legal person. | The company is a separate legal entity from you. |
| Liability | You're personally responsible for business debts. | Liability is generally limited to what you've invested. |
| Tax on profits | Income Tax and Class 4 National Insurance on all profits. | Corporation Tax on company profits; you pay personal tax on what you take out. |
| Paying yourself | You simply draw money from the business. | Usually a combination of salary and dividends. |
| Setting up | Register with HMRC for Self Assessment. | Incorporate at Companies House, then register for Corporation Tax. |
| Annual filings | One Self Assessment tax return. | Statutory accounts, Corporation Tax return, confirmation statement, plus directors' personal returns where needed. |
| Privacy | Your accounts aren't public. | Accounts and directors' details appear on the public register. |
| Making Tax Digital | Applies to sole traders and landlords from April 2026 above £50,000 of qualifying income. | Not currently subject to MTD for Income Tax. |
Legal status
Sole traderYou and the business are the same legal person.
Limited companyThe company is a separate legal entity from you.
Liability
Sole traderYou're personally responsible for business debts.
Limited companyLiability is generally limited to what you've invested.
Tax on profits
Sole traderIncome Tax and Class 4 National Insurance on all profits.
Limited companyCorporation Tax on company profits; you pay personal tax on what you take out.
Paying yourself
Sole traderYou simply draw money from the business.
Limited companyUsually a combination of salary and dividends.
Setting up
Sole traderRegister with HMRC for Self Assessment.
Limited companyIncorporate at Companies House, then register for Corporation Tax.
Annual filings
Sole traderOne Self Assessment tax return.
Limited companyStatutory accounts, Corporation Tax return, confirmation statement, plus directors' personal returns where needed.
Privacy
Sole traderYour accounts aren't public.
Limited companyAccounts and directors' details appear on the public register.
Making Tax Digital
Sole traderApplies to sole traders and landlords from April 2026 above £50,000 of qualifying income.
Limited companyNot currently subject to MTD for Income Tax.
Sole trader often suits
People starting out, with lower profits, who want simple admin and flexibility.
Self employment / Making Tax Digital pricingA company often suits
Growing businesses with higher profits, staff or a need for limited liability.
Limited company pricingStill undecided?
We'll look at your figures and talk you through it.