Sole trader vs limited company, UK 2026/27: what you actually keep

Sole trader or limited company: what do you keep?

Enter your yearly profit. You get the take-home both ways, the best director salary for the company, every tax line, and how the gap moves with profit.

England, Wales and Northern Ireland rates for 2026/27. Not tax advice. Confirm rates on GOV.UK. Scottish bands, student loans, pension contributions and VAT are not modelled.

Yearly profit before tax and director pay (£)

Extra yearly cost of running a company (£)

Profit you leave in the company after corporation tax (£)

Director salary

Chosen salary (£, if you choose it)

Employment Allowance available

Keep a State Pension qualifying year

What you keep

Line	Sole trader	Limited company

Across profit levels (same settings)

Profit	Sole trader keeps	Limited company keeps	Difference

Summary to copy

How it is worked out

Sole trader: income tax at 20/40/45% after the personal allowance (tapered from £100,000) plus Class 4 National Insurance at 6% to £50,270 and 2% above. Company: director salary, employer National Insurance at 15% above £5,000, corporation tax at 19% to £50,000 rising to 25% from £250,000 with marginal relief between, then the rest paid as dividends taxed at 10.75% / 35.75% / 39.35% after a £500 allowance. The best salary is found by trying salaries in £100 steps. Not decided here: Scottish bands, student loans, pension contributions, VAT, IR35, director's loan rules, and whether lenders will treat dividends as income.

Common questions

Is it still worth setting up a limited company in 2026/27?

Often less than it used to be. Dividend tax rose two points in April 2026 (ordinary rate 10.75%, upper rate 35.75%) and employer National Insurance is 15% above £5,000, while the sole trader's Class 4 National Insurance is 6% up to £50,270. At many profit levels the sole trader keeps about the same or more once the company's running costs are counted. The calculator runs your own numbers.

What is the best director salary in 2026/27?

For a one-director company with no Employment Allowance, the answer is usually £12,570 (the personal allowance, no employee National Insurance and income tax) or £5,000 (no employer National Insurance). The calculator tests salaries in steps and shows the one that leaves you the most, keeping the year as a qualifying year for the State Pension by default.

What does Making Tax Digital for Income Tax change for sole traders?

From April 2026, sole traders with qualifying income above £50,000 keep digital records and send quarterly updates through software. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. It is measured on gross income before expenses. A limited company is outside that scheme.

Does it cover Scotland?

No. It uses the rates for England, Wales and Northern Ireland. Scottish income tax bands differ, and student loan repayments, pension contributions and VAT are not modelled.

Is this tax advice?

No. It is an estimate from published 2026/27 rates. Confirm figures on GOV.UK or with an accountant before you incorporate, which is a hard-to-reverse decision.