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2025/26 tax year — rates from 6 April 2025

Limited company vs sole trader — an honest comparison.

Which structure actually leaves more in your pocket? Set your profit and region below and see both, side by side, for 2025/26 — with every rate cited to gov.uk and none of the “go limited to save tax” hand-waving.

Annual business profit
£60,000per year
£20,000£110,000£200,000
At £60,000 profit, a limited company keeps £719.77 more a year.

Sole trader

£46,111
take-home a year
Income tax£11,432.00
Class 4 NI£2,456.60
Total tax & NI£13,888.60

Limited company

Keeps more
£46,831
take-home a year
Salary£12,570.00
Dividends£37,498.54
Corporation tax£8,795.96
Dividend tax£3,237.37
Employer NI£1,135.50
Total tax & NI£13,168.83

Assumes you take all profit out of the company — a salary up to the personal allowance, the rest as dividends.

Assumes a single director with no other employees, so no Employment Allowance, and a full 12-month accounting period with no associated companies.

Non-tax factors — limited liability, retaining profits in the company, and larger pension contributions — aren't captured here.

How each one is taxed

A sole trader pays income tax and Class 4 National Insurance on their profit — one calculation, one Self Assessment return. A limited company is a separate legal entity: it pays corporation tax on its profits, and you pay yourself with a mix of salary and dividends, each taxed differently in your own hands.

The tax-efficient company route is a small salary up to the £12,570 personal allowance, then dividends. The company pays 15% employer NI on the salary above £5,000 and corporation tax (19% up to £50,000 of profit, rising through marginal relief to 25% by £250,000) on what remains. You then pay dividend tax personally — nothing on the first £500, then 8.75%, 33.75% or 39.35% depending on your band.

Stack all of that up and, for 2025/26, the sole trader is competitive across most profit levels once you take everything out — largely because Class 4 NI was cut to 6% while dividend tax rose. The company’s edge shows up when you don’t need all the money.

Tax isn’t the whole story

A limited company can still be the right call even when the take-home is similar — for limited liability that protects your personal assets, the ability to retain profit in the company and draw it in a lower-income year, and far larger company pension contributions. Against that, weigh the extra accountancy and filing. The comparison above is the tax picture; the decision is bigger than tax.

Just starting out? See what a sole trader takes home first.

Questions people ask

Sources

Every rate in this comparison comes from an official gov.uk page: