Sole Trader vs Limited Company Calculator

Use your actual or forecast turnover for the next 12 months — not revenue minus expenses. The tool will calculate profit for you.

Include everything genuinely business-related: equipment, software subscriptions, travel, home-office costs, professional insurance, training. Don’t include accountancy — we add a benchmark for each structure separately.

If you pay 5% of profit into a pension, slide to 5%. This is pre-tax for both structures. High earners should consider higher % — it’s one of the best remaining tax reliefs.

Scottish residents use different income-tax bands (19%–48%). Dividend tax is the same UK-wide.

For a single director the classic "optimal" is around £12,570 salary + rest as dividends. Try 20–30% salary and see how the numbers move. The slider splits remaining profit (after pension) between salary and dividends.

The headline card shows which structure wins at your revenue and the exact savings per year. The crossover tab plots the break-even point.

Profits up to £50,000 pay 19% (small profits rate). Profits £250,000+ pay 25% flat. In between, HMRC applies marginal relief: tax at 25% minus (£250,000 − profit) × 3⁄200. This produces an effective marginal rate of about 26.5% on each pound in the middle band — intentionally higher than 25% to smooth the transition.

Dividends stack on top of salary. If your salary is £12,570 (uses all Personal Allowance), your next £500 of dividends is tax-free (dividend allowance) and the next £37,200 (to the £50,270 threshold) is taxed at 8.75%. Above that it’s 33.75%. This is why a £100k Ltd director pays noticeably more tax than a £100k sole trader.

If HMRC deems your contract "inside IR35" (i.e. you’re effectively a disguised employee), the client must deduct PAYE on your invoices as though you were staff. The Ltd-company tax advantages vanish. Check every contract using HMRC’s CEST tool, and get written contractor status from the client for medium/large engagements.

Above £100,000 adjusted net income, your £12,570 personal allowance drops by £1 for every £2 over £100k — giving an effective 60% tax rate between £100k and £125,140. Limited company directors can avoid this by keeping salary + dividends under £100k and retaining more in the company. Sole traders can’t.

Liability protection (your personal assets are ring-fenced), credibility with larger clients, pension contribution headroom (employer contributions up to £60k/yr), and succession planning (you can give shares to a spouse or sell the company). These can tip the decision even when the pure tax saving is small or negative.