This calculator is being updated for the latest tax year. Please contact Calibra if you would like help comparing your options.
Contact CalibraSole trader vs limited company: common questions
Is it better to be a sole trader or a limited company?
Neither is always better. A limited company can be more tax efficient at some profit levels, but it brings more administration, separate legal responsibilities and different rules for taking money out. The right choice depends on your profit, how much you need to withdraw and your wider circumstances.
At what profit does a limited company become more tax efficient?
There's no single figure. It depends on your profit, other income, how much you withdraw, the salary you take and the tax rates for the year. This calculator lets you test your own figures under stated assumptions.
Does the calculator include Corporation Tax?
Yes. For the limited company scenario it estimates Corporation Tax on profit after the director's salary and employer National Insurance, including marginal relief where it applies.
Does the calculator include salary and dividends?
Yes. It assumes a director's salary (a standard figure, your own figure or several scenarios) and then dividends paid from profit after Corporation Tax, up to the amount you need to withdraw.
Why might a limited company show retained profit?
If you take out less than the company's profit after tax, the rest stays in the company. It isn't personal income, and tax may be due if you take it out later.
Is this calculator suitable for companies with more than one shareholder?
No. It assumes one owner who is both the only director and the only shareholder. If there are other shareholders or directors, you'll need a tailored calculation.
Does this tool take Scottish Income Tax into account?
Only when Scottish rates have been set up and approved for the selected tax year. Otherwise, the calculator shows a general illustration and explains that it can't give a reliable comparison.
Is the result personal tax advice?
No. The calculator provides an illustrative estimate based on your figures and the assumptions shown. You should get professional advice before changing your business structure.