Business structure · 2026/27 tax year
Sole trader vs limited company take-home UK 2026/27
Compare illustrative take-home if you recognise the same profit as a sole trader (Income Tax + Class 4 NI) versus a simplified limited-company path (corporation tax then dividends only).
Income Tax: £11,432
Class 4 NI: £2,457
Take-home: £46,111
Corporation tax: £15,000
Dividends paid: £45,000
Dividend tax: £2,794
Take-home: £42,206
Understanding your results
Treat the two columns as different stories about the same headline profit, not a scoreboard where one structure always wins. Incorporation changes legal liability, how clients contract with you, banking covenants, and how you extract cash — not just the colour of the tax line.
The sole trader path keeps everything on your personal tax return today. That transparency is why Class 4 NI and Income Tax feel blunt: there is nowhere to hide profit inside a shell without another election or structure.
The simplified company path here assumes profits are taxed in the company, then everything distributable leaves as dividends. Real life usually adds a small salary to use the Personal Allowance efficiently and trigger NI credits; skipping that tilts the model toward dividends and can mis-rank the options.
Accountancy fees, Companies House, payroll software, and investor readiness all have price tags that sit outside this calculator. Spread those costs across the years you expect to trade as a limited company before you declare a winner on take-home alone.
If you are near VAT registration thresholds or R&D-heavy, the company side can unlock different reliefs entirely. That is a second spreadsheet conversation, not a tweak to this one.
Export the numbers to your adviser with your actual pension, mortgage, and cash needs attached — structures should serve solvency, not the other way around.
Disclaimer: This is a guidance estimate based on the 2026/27 tax year. It is not personal tax advice — consult an accountant or HMRC for your specific circumstances.
About this calculator
This is a teaching comparison, not a recommendation to incorporate. Real limited companies mix salary, pension, R&D relief, and marginal corporation tax — none of which are fully modelled here.
The sole trader side uses the same logic as our self-employed tax calculator: Personal Allowance taper, Income Tax bands, and Class 4 NI on profit.
The limited-company side applies illustrative corporation tax (19% on profits up to £50,000, otherwise 25% flat — marginal relief between bands is omitted), then assumes remaining cash is paid as dividends with Personal Allowance and the dividend allowance applied using standard dividend tax rates.
Employer National Insurance, director payroll, and the timing of dividends are ignored. Use the result to start a conversation with an accountant, not to choose a legal structure.