Put in your annual profit and see exactly what you would keep under each structure, with every tax broken out line by line.
For the 2025/26 tax year, a limited company only beats sole trader status on take-home pay across a fairly narrow band of profit, roughly £55,000 to £75,000, and the gap is small. Below that the sole trader usually wins; above it the company loses ground quickly, because profit is taxed twice: corporation tax first, then dividend tax on the way out.
Two changes caused this. Corporation tax rose to 25% (with marginal relief between £50,000 and £250,000), while Class 4 National Insurance for the self-employed was cut to 6%. The old rule of thumb that "you should incorporate once you hit £30,000" no longer holds on tax alone.
Tax is only one reason to incorporate, though. Limited liability, credibility with larger clients, retaining profit inside the company and pension planning can all outweigh a few hundred pounds either way.
Annual profit before any tax, salary or dividends.
Here is exactly what the tool does with your numbers.
Both routes start from the same annual profit and assume you take every penny out in the same tax year. That assumption matters, and the limitations below explain why.
| Item | Rate |
|---|---|
| Personal allowance | £12,570 |
| Basic / higher / additional income tax | 20% / 40% / 45% |
| Class 4 NI (self-employed) | 6% then 2% |
| Employer NI | 15% above £5,000 |
| Corporation tax | 19% to 25% |
| Dividend allowance | £500 |
| Dividend rates | 8.75% / 33.75% / 39.35% |
No. On take-home pay alone for 2025/26, a limited company only wins over a fairly narrow band of profit, roughly £55,000 to £75,000, and usually by a few hundred pounds. Below and above that range a sole trader typically keeps more, because company profit is taxed twice: corporation tax first, then dividend tax when you draw it.
There are still strong non-tax reasons to incorporate, including limited liability, winning work from clients who will not contract with sole traders, and the ability to leave profit in the company rather than being taxed on all of it every year.
There is no longer a clean threshold. The old advice of incorporating around £30,000 to £40,000 of profit dates from when corporation tax was a flat 19% and Class 4 National Insurance was 9%. Corporation tax now reaches 25% and Class 4 NI has been cut to 6%, which removed most of the gap.
Run your own figure through the calculator, then subtract roughly £500 to £1,500 a year for accountancy and filing. If the remaining advantage is small, decide on liability and commercial factors instead.
For a single-director company with no other employees, £12,570 is the usual choice. It is fully covered by the personal allowance, it earns a qualifying year towards the state pension, and although it triggers employer National Insurance above £5,000, the salary and that NI are both deductible against corporation tax, which more than covers the cost.
If you have other employees and can claim the £10,500 Employment Allowance, the employer NI disappears and a £12,570 salary becomes clearly better again.
Yes. Switch the region toggle to Scotland and salary and self-employed profits are taxed using the Scottish bands, which run from a 19% starter rate up to a 48% top rate. Dividend tax is not devolved, so dividends are always taxed at the UK-wide rates and bands even for Scottish taxpayers. The calculator handles that split correctly.
No. The comparison is tax only. A limited company also brings annual accounts, a confirmation statement, a corporation tax return, payroll if you take a salary, and usually an accountant. Budget somewhere between £500 and £1,500 a year for that, and treat any tax advantage smaller than this as no advantage at all.
Built by Veris Labs
These calculators are a small, public version of what we do. The Veris Labs suite covers marketing and delivery, and where nothing off the shelf fits, we build it around your business instead.
