Business
8 min read
Sole trader or limited company? The numbers that decide it
Incorporating can save tax, but not always, and it brings extra paperwork. We walk through the figures we look at before recommending either route.
Profit is the starting point
Below a certain level of profit, the tax saving from a company is small and the extra costs of accounts, filings and payroll can outweigh it. Above it, the difference can be significant.
How you take the money out matters
A company pays Corporation Tax on its profits, and you then pay tax again on the salary and dividends you draw. The right mix depends on your other income and on how much you leave in the business.
Risk and credibility
A limited company separates your personal assets from the business. Some clients and lenders also prefer to deal with a company. These points are not about tax, but they often decide the question.
Our approach
We model both options with your real numbers on the first call. If staying a sole trader suits you better, we say so.