Sole trader vs limited company: the 2026/27 take-home, honestly
On 2026/27 rates, a sole trader who draws all their profit usually keeps more than a limited company doing the same, and the gap grows as profit rises. That reverses the received wisdom, because three changes closed the old gap: self-employed National Insurance fell to 6%, dividend tax rose to 10.75% and 35.75%, and the employer National Insurance threshold dropped to £5,000. Enter your annual profit below to see both take-home figures on current rates, then read why the limited company can still be the right call for reasons that have nothing to do with this number.
- sole trader take-home
- limited company take-home
- difference
| Sole trader | Limited company | |
|---|---|---|
| Income tax | ||
| National Insurance | ||
| Corporation tax | None | |
| Dividend tax | None | |
| Total tax |
Take-home is one input. If you are staying self-employed,the best sole trader accounts are here. If you are going limited for the liability protection or to retain profit,register and open the account in a day.
Take-home at five profit levels (2026/27)
| Annual profit | Sole trader | Limited company | Better by |
|---|---|---|---|
| £30,000 | £25,468 | £24,403 | Sole trader £1,065 |
| £50,000 | £40,268 | £38,862 | Sole trader £1,406 |
| £75,000 | £54,811 | £53,404 | Sole trader £1,408 |
| £100,000 | £69,311 | £65,210 | Sole trader £4,102 |
| £150,000 | £92,040 | £85,110 | Sole trader £6,931 |
Why the old advice is out of date
The limited company take-home advantage was real for years, and three rate changes hollowed it out. Class 4 National Insurance for the self-employed dropped from 9% to 6%, which straightforwardly hands the sole trader more. Dividend tax rose to 10.75% at the basic rate and 35.75% at the higher rate, taxing the company owner's main way of getting paid. And the employer National Insurance secondary threshold fell to £5,000, so even a modest director's salary now triggers a charge that a sole trader never pays. Stack the three together and the company is taxed twice, corporation tax then dividend tax, for a smaller and often negative net benefit once every pound is extracted.
When a limited company still wins
- You retain profit rather than draw it. Money left in the company is taxed at 19% to 25% corporation tax and no more, against income tax rates of up to 45% on a sole trader's whole profit whether they spend it or not.
- You want limited liability. A company is a separate legal person, so business debts and most claims stop at the company. A sole trader is personally liable without limit. For many people this alone settles it.
- You pay into a pension from the company. Employer pension contributions are a deductible company expense and sidestep the extraction tax entirely, a lever a sole trader does not have in the same form.
- Clients or lenders expect a company. Some contracts, framework suppliers and agencies will only engage a limited company, and the structure can read as more established.
What this calculator assumes
Profit drawn out in full in the year, a single-director company on a £12,570 salary with the balance as dividends, no other income, and England, Wales or Northern Ireland rates. It excludes Scottish income tax bands, the £100,000 to £125,140 allowance taper is applied, pension contributions, student loans and expenses beyond the salary. Figures follow gov.uk rates for 2026/27. This is a planning tool, not tax advice, so confirm your own position with an accountant before restructuring, and never deregister a company for a tax figure without weighing the liability and retention points above.
Questions people actually ask
Is a sole trader or a limited company better for tax in 2026/27?
If you draw all your profit out as income, a sole trader usually keeps more in 2026/27. Three changes closed the old limited company gap: Class 4 National Insurance for the self-employed fell to 6%, dividend tax rose to 10.75% and 35.75%, and the employer National Insurance threshold dropped to £5,000. The company's tax case now rests on retaining profit, not extracting it.
Why do most calculators say a limited company saves thousands?
Because they use pre-2026 rates. The classic advantage assumed 9% Class 4 National Insurance, an 8.75% dividend rate and a £9,100 employer threshold. All three moved against the limited company from April 2024 to April 2026, so any comparison built on the old numbers overstates the saving, often by thousands.
So should I stay a sole trader?
For tax on money you take out each year, often yes in 2026/27. But limited companies still win on limited liability, retaining profit at 19% to 25% instead of drawing it at income tax rates, pension contributions from the company, and credibility with clients and lenders. Tax take-home is one input, not the decision.
What salary does the calculator assume for the limited company?
A director's salary of £12,570, the personal allowance, with the rest drawn as dividends. This is marginally more tax-efficient than a £5,000 salary for 2026/27 despite the employer National Insurance it triggers, because the salary and that NI are both deductible against corporation tax.
Does this include retaining profit in the company?
No. The calculator assumes you extract all profit in the year, which is the fair like-for-like comparison of take-home pay. If you leave profit in the company, it is taxed only at 19% to 25% corporation tax and the limited company looks far better, but that money is in the business, not your pocket.