Figures use 2026/27 rates for England, Wales and Northern Ireland: a £12,570 personal allowance, 20% / 40% / 45% income tax, Class 4 NI at 6% and 2%, corporation tax at 19% up to £50,000 with marginal relief to £250,000, Employer NI at 15% above £5,000, and the increased dividend rates of 10.75% and 35.75% that took effect on 6 April 2026 (39.35% above £125,140, with the £500 dividend allowance unchanged). Scottish taxpayers pay different income tax rates on salary and self-employed profits — dividends and corporation tax are the same UK-wide, so a Scottish sole trader's figure here will be off, usually making the limited company look slightly less attractive than it really is.
The model assumes you take every penny of post-tax company profit out as dividends in the same year, you have no associated companies, you're outside IR35 or not working through an agency arrangement, and you're not claiming pension contributions, the trading allowance, or capital allowances. Leaving profit in the company, paying into a pension from the company, or having a spouse as a second shareholder can all shift the answer significantly. Check gov.uk's guidance on setting up a business and take advice before you incorporate — the structure is easy to enter and awkward to unwind.
"Should I go limited?" used to have a fairly reliable answer: once your profit cleared £30,000–£40,000, incorporating saved you money. That stopped being true on 6 April 2026. The dividend rates rose two points to 10.75% and 35.75%, and once you stack them on top of corporation tax the combined bite on money you actually take out of a company is now about 27.7% in the basic rate band, against 26% for a sole trader paying income tax plus Class 4 National Insurance. Higher up it's worse, not better: roughly 48% through a company versus 42% as a sole trader, and worse still between £50,000 and £250,000 of company profit where marginal relief pushes the effective corporation tax rate to 26.5%.
So if the plan is to draw out everything you earn each year, the arithmetic below will almost certainly tell you to stay a sole trader — and the more you earn, the clearer that gets. What it can't tell you is whether the reasons people actually incorporate still apply to you: limited liability if the work carries real risk, retaining profit inside the company at 19–25% instead of drawing it at 42%, paying into a pension from company funds, splitting shares with a spouse, or simply winning clients who won't contract with a sole trader. Those are the live arguments in 2026/27. "It's more tax-efficient" no longer is, for full extraction.
This sole trader vs limited company tax calculator runs both structures on the same profit figure using 2026/27 rates and shows the difference in pounds, not percentages. It works out corporation tax including marginal relief, applies Employer National Insurance to your director's salary, stacks dividends correctly on top of any other income you have, and — if you ask it to — sweeps every salary level to find the one that leaves you with the most money.
On these rates, and assuming you take all the profit out in the same year, it doesn't — at any level. That's a genuine change from previous years rather than a quirk of this tool: the April 2026 dividend increase pushed the combined corporation-tax-plus-dividend cost above the sole trader's income tax plus Class 4 National Insurance in both the basic and higher rate bands, before you've paid a penny of extra accountancy fees. Incorporating can still leave you better off overall if you leave profit in the company, make employer pension contributions, or share ownership with a lower-earning spouse — none of which this calculator models.
£5,000 is the Employer NI secondary threshold, so a salary at that level costs the company no National Insurance at all. £12,570 is the personal allowance, so the salary is income-tax-free to you and the extra £7,570 is deductible against corporation tax — but it triggers 15% Employer NI on the amount above £5,000 unless the company can claim the £10,500 Employment Allowance. A company whose only paid employee is a single director can't claim that allowance, which is why sole directors often land on the lower figure and directors with staff land on the higher one. The "work out the best salary for me" option tests every level and picks the winner for your numbers.
No. If you provide services through your own company to a single end client who controls how you work, IR35 (the off-payroll working rules) can force that income to be taxed broadly like employment, wiping out the dividend advantage entirely and leaving you worse off than a sole trader after running costs. Medium and large private-sector clients, and all public-sector ones, decide your status for you. If most of your income comes from one client, get your IR35 position confirmed before you incorporate — this calculator assumes you're genuinely outside it.