Company formation
Limited companies usually win above roughly £40,000 of profit, and on liability and credibility. Sole trader wins on simplicity. The comparison in detail.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityBelow roughly £30,000 to £40,000 of profit, sole trader is simpler with little tax difference. Above that, and especially where profit is retained in the business, a limited company is usually more efficient, with limited liability as the other main driver.
Tax and cash
The non-tax reasons
Below roughly £30,000 to £40,000 of profit, sole trader is simpler with little tax difference. Above that, and especially where profit is retained in the business, a limited company is usually more efficient, with limited liability as the other main driver.
A sole trader pays income tax at 20%, 40% or 45% plus Class 4 National Insurance on all profit, whether drawn or not. A company pays 19% to 25% corporation tax, and you pay personal tax only on salary and dividends actually taken, so retained profit is taxed once at the lower rate.
Against that, a company costs more to run, needs payroll and accounts, and gives you less flexibility to take money out casually. Our sole trader versus limited company comparison tool runs both on your own figures.
Limited liability protects personal assets where the business fails, subject to personal guarantees. Many larger clients, agencies and insurers will only contract with a company, and lenders and investors expect one. A company name is also protected on the register.
The cost of being wrong is low: you can incorporate later and transfer the trade, with incorporation relief available on the goodwill and asset transfer where the conditions are met.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Yes, running a separate sole trade alongside a company is possible, but keep the activities and records genuinely separate.
In most B2B sectors, yes. In some trades, customers do not care.
Company accounts are public and, under the transparency reforms, will include a profit and loss account. Sole trader accounts are never public.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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Pick a time that suits you and a qualified accountant will call you about your company, deadlines and fees.
Appointments run monday to friday, 9:00am to 5:30pm. Your confirmation is emailed straight away.
