What the calculator compares

The calculator compares the same profit under each structure:

  • Sole trader — income tax plus Class 4 National Insurance on the whole profit.
  • Limited company — a small £12,570 salary, corporation tax on the rest, then the balance drawn as dividends with dividend tax on top.

The difference is the annual tax saving (or cost) of incorporating, on tax alone.

At 2026/27 rates the calculator shows the sole trader keeping more at each of these illustrative profit levels: about £894 a year more on £20,000, £1,406 on £50,000, £1,947 on £80,000, £4,102 on £100,000, £6,931 on £150,000 and £16,986 on £250,000. The gap does not grow steadily. The two come out roughly level at around £60,000 of profit, and the gap narrows between £100,000 and £125,140, where a sole trader loses the personal allowance.

Reasons beyond tax A limited company also gives you limited liability, more credibility with some clients, and the ability to raise investment or keep profit in the company at corporation tax rates. It also brings more admin and filing, and the money belongs to the company until you take it out.

Should you incorporate?

Taking all the profit out through a company almost always costs more tax, so the case for incorporating rests on the other reasons: limited liability, keeping profit in the company at corporation tax rates, pension planning, splitting income with a spouse, credibility and raising investment. Staying a sole trader keeps things simpler if none of those apply yet. Our comparisons cover the decision in more detail, and we can work out your own figures.