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)?
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:
- Sole trader tax: Income tax 20%/40%/45% + Class 4 NI 6%/2% above £12,570.
- Limited company tax: Corporation tax 25% (with marginal relief £50k–£250k) + dividend tax 8.75%/33.75%/39.35% above £500.
- Salary sacrifice availability: Ltd companies can pay employer pension contributions sidestepping income tax + NI; sole traders use personal contributions with relief at ): 1.
- BADR (business asset disposal relief): 14% in 2025/26, 18% in 2026/27 on qualifying business disposals — only available to Ltd shareholders and qualifying partnerships.
- Spouse-shareholder strategy: Splitting share ownership in a Ltd to use both spouses' allowances — not possible in sole trader.
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.
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.
Figures use 2026/27 UK tax-year rates and thresholds. Verify your specific situation against HMRC, FCA or MoneyHelper guidance before deciding.
How UK Tax Drag holds itself to account
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.