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Sole trader vs Limited Company decision tree

An interactive 6-question decision tree for UK self-employed people choosing between sole trader and limited company structures for 2026/27. Routes you to a recommendation with the calculators and editorial guides to verify.

3-minute read

A 6-question interactive decision tree for the UK 2026/27 tax year. Answer the questions below and we'll route you to the sole trader, limited company, or partnership recommendation — plus the specific calculators and editorial guides to verify it for your numbers.

Should I be a sole trader or limited company?

Question 1 of 6 — What's your annual taxable profit (after expenses)?

Step 1 of 6 · Restart

The full editorial guide

This decision tree gives a directional answer. For the full mechanic — comparison tables, tax calculations at every profit level, the partnership and LLP options, the dividend allowance interaction — see the complete sole trader vs limited company guide.

The numbers behind the tree

Key 2026/27 inputs the tree uses:

Sources and methodology

Tax rates and structures follow HMRC's published 2026/27 figures. For a personalised analysis, see the sole trader calculator, the dividend vs salary calculator, and the full comparison guide. The methodology page documents sources.

Editorial accountability
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Every page is reviewed against the editorial standards, written from primary sources, sourced openly, and corrected publicly. No affiliate revenue. No sponsored content. No paid placements.

Editorial standards Editorial process Corrections policy How we make money Editorial team Methodology

Sole Trader vs Limited Company — 2026/27 UK comparison

The choice affects tax rates, admin burden, and personal liability. Most UK businesses start sole trader and incorporate at the £30-50k profit threshold.

Dimension Sole TraderLimited Company
Setup cost£0 — register with HMRC£12 Companies House + accountancy fees (~£100-£300/year)
Personal liabilityUnlimited — your assets at riskLimited to share capital + any personal guarantees
Tax on first £12,5700% (Personal Allowance)19% Corporation Tax (small profit rate)
Tax on £30k profit~£3,656 income tax + Class 4 NI + Class 2 NI ≈ £4,981£5,700 Corp Tax + dividend tax ~£1,755 ≈ £7,455
Tax on £100k profit~£27,500 income tax + NI£19,000 Corp Tax + £15,750 dividend tax ≈ £34,750 (but staged extraction can reduce)
Pension contributionsPersonal contributions up to £60k AAEmployer contributions (no PA needed); flexible across years
Filing burdenSelf Assessment once a yearCompanies House annual return + Confirmation Statement + Corporation Tax return + dividend documentation
Accounting requirementsBasic income/expense records (or cash basis if < £150k)Full statutory accounts (FRS 102 or FRS 105 for micro)
Credibility / contractsLower for B2B and governmentHigher — many contracts require Ltd company status
Best forProfits under £30k, simple operations, low growthProfits over £30k, scaling business, B2B contracting, IR35 outside

Figures use 2026/27 UK tax-year rates and thresholds. Verify your specific situation against HMRC, FCA or MoneyHelper guidance before deciding.