Sole Trader vs Limited Company Calculator
Compare your take-home pay as a sole trader versus a limited company director for 2025/26 — including Income Tax, National Insurance, Corporation Tax, and Dividend Tax.
Your Business Details
£
£0£300k
For sole trader: profit after expenses. For Ltd: profit before salary — the company’s pre-tax profit.
The salary paid through payroll. Remaining profit is extracted as dividends. A £9,100 salary avoids Employer NI (after Employment Allowance) and keeps Corporation Tax deductions.
Employment Allowance available? (reduces Employer NI by up to £10,500)
Include Ltd company annual admin costs (accountant, Companies House etc.)
Take-Home Pay Comparison
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Option A
Sole Trader
Business profit—
Income Tax—
Class 4 NI—
Class 2 NI—
Take-home pay
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Effective rate: —
Option B
Limited Company
Company profit—
Director salary—
Employer NI—
Corporation Tax—
Income Tax on salary—
Employee NI on salary—
Dividend Tax—
Admin costs (est.)—
Take-home pay
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Effective rate: —
⚠️ Don’t forget the admin costs
Running a limited company typically costs £800–£1,500/year in accountancy fees, Companies House filing (£13/yr), and payroll admin. This calculator uses £1,200/year as an estimate. The tax saving needs to exceed this for a limited company to make financial sense.
Running a limited company typically costs £800–£1,500/year in accountancy fees, Companies House filing (£13/yr), and payroll admin. This calculator uses £1,200/year as an estimate. The tax saving needs to exceed this for a limited company to make financial sense.
💡 Breakeven insight
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How the Tax Works
Sole Trader
You pay Income Tax and Class 4 NI directly on your business profits. Class 4 NI is 6% between £12,570 and £50,270, then 2% above. Income Tax is 20% (basic), 40% (higher over £50,270) and 45% (additional over £125,140). Profits are immediately yours after tax — no salary or dividend process needed.
You pay Income Tax and Class 4 NI directly on your business profits. Class 4 NI is 6% between £12,570 and £50,270, then 2% above. Income Tax is 20% (basic), 40% (higher over £50,270) and 45% (additional over £125,140). Profits are immediately yours after tax — no salary or dividend process needed.
Limited Company
Your company pays Corporation Tax on profits (19% up to £50k, 25% above £250k, marginal relief between). You then extract money via salary (subject to Income Tax and NI) and dividends (taxed at lower rates: 8.75% basic, 33.75% higher, 39.35% additional). Dividends have a £500 allowance.
Your company pays Corporation Tax on profits (19% up to £50k, 25% above £250k, marginal relief between). You then extract money via salary (subject to Income Tax and NI) and dividends (taxed at lower rates: 8.75% basic, 33.75% higher, 39.35% additional). Dividends have a £500 allowance.
The optimal salary strategy
Most directors take a salary of £9,100/year — just above the Lower Earnings Limit (qualifying for state pension credits) but below the Secondary NI Threshold, avoiding Employer NI. The Employment Allowance (£10,500) absorbs Employer NI if you have other employees; solo directors cannot claim it alone.
Most directors take a salary of £9,100/year — just above the Lower Earnings Limit (qualifying for state pension credits) but below the Secondary NI Threshold, avoiding Employer NI. The Employment Allowance (£10,500) absorbs Employer NI if you have other employees; solo directors cannot claim it alone.
When does Ltd become worth it?
Generally around £35,000–£45,000 profit after accounting for admin costs. Below that, the tax saving is minimal and the extra admin rarely justifies it. Above £50,000, the benefit grows — especially if you retain profits in the company rather than withdrawing everything.
Generally around £35,000–£45,000 profit after accounting for admin costs. Below that, the tax saving is minimal and the extra admin rarely justifies it. Above £50,000, the benefit grows — especially if you retain profits in the company rather than withdrawing everything.
Assumptions & Notes
2025/26 tax rates for England, Wales & Northern Ireland · Personal Allowance: £12,570 (tapered above £100,000) · Income Tax: 20% (£12,571–£50,270), 40% (£50,271–£125,140), 45% (above £125,140) · Class 4 NI: 6% (£12,570–£50,270), 2% above · Class 2 NI: £3.45/week (2025/26) where profits exceed £12,570 · Corporation Tax: 19% (≤£50k profit), 25% (≥£250k), marginal relief between (fraction 3/200) · Employer NI: 15% above £5,000 secondary threshold · Employment Allowance: £10,500 (not available to sole-director companies) · Employee NI: 8% (£12,570–£50,270), 2% above · Dividend Allowance: £500 · Dividend Tax: 8.75% basic, 33.75% higher, 39.35% additional · Assumes single owner, no other income, all profits withdrawn · Admin cost estimate: £1,200/year · Scottish taxpayers face different Income Tax bands.
2025/26 tax rates for England, Wales & Northern Ireland · Personal Allowance: £12,570 (tapered above £100,000) · Income Tax: 20% (£12,571–£50,270), 40% (£50,271–£125,140), 45% (above £125,140) · Class 4 NI: 6% (£12,570–£50,270), 2% above · Class 2 NI: £3.45/week (2025/26) where profits exceed £12,570 · Corporation Tax: 19% (≤£50k profit), 25% (≥£250k), marginal relief between (fraction 3/200) · Employer NI: 15% above £5,000 secondary threshold · Employment Allowance: £10,500 (not available to sole-director companies) · Employee NI: 8% (£12,570–£50,270), 2% above · Dividend Allowance: £500 · Dividend Tax: 8.75% basic, 33.75% higher, 39.35% additional · Assumes single owner, no other income, all profits withdrawn · Admin cost estimate: £1,200/year · Scottish taxpayers face different Income Tax bands.
This calculator is for illustrative purposes only and does not constitute financial or tax advice. Always consult a qualified accountant before choosing your business structure.