Sole Trader vs Limited Company Calculator | Should I Incorporate? | Fileo & Co
Free Tax Calculator — Fileo & Co

Should you switch to
a limited company?

Enter your earnings below and find out exactly how much tax you would save by incorporating and whether it makes sense for your business right now.

Sole Trader vs Limited Company

Enter your figures. Get your answer in seconds.

£
Your total income before any expenses
£
Allowable business costs per year
As a Sole Trader
Gross profit
Income tax
Class 2 NI
Class 4 NI
Total tax & NI
Take home pay
As a Limited Company
Gross profit
Director salary (optimal)
Corporation tax (19%/25%)
Dividend tax
Total tax
Take home pay
Your Result

You could save significantly by incorporating.

This calculator provides an estimate based on 2024/25 tax rates. It assumes the optimal director salary strategy (£12,570 personal allowance), the small profits rate of corporation tax for profits under £50,000 and the marginal relief band up to £250,000. It does not account for pension contributions, other reliefs or individual circumstances. Speak to a qualified accountant before making any decisions.

How It Works

Why a limited company
pays less tax.

As a sole trader, every pound of profit is treated as personal income and taxed accordingly income tax at up to 45% plus Class 4 National Insurance on top. As a limited company director, you have far more control over how and when you take money out of your business, which opens up significant tax efficiencies.

The most effective strategy is to pay yourself a small salary (up to the personal allowance or NI threshold) and take the remainder as dividends. Dividends are taxed at lower rates than income and are not subject to National Insurance. The company itself pays corporation tax on its profits currently 19% for profits under £50,000 which is significantly lower than higher rate income tax.

01
Lower Tax Rates
Corporation tax at 19% (small profits) is considerably lower than the 40% higher rate income tax a successful sole trader pays.
02
No NI on Dividends
Dividends are not subject to National Insurance. As a sole trader, you pay Class 4 NI at 6% on profits above £12,570 a cost that simply disappears when you incorporate.
03
Salary & Dividend Split
Taking a small salary to use your personal allowance and paying the rest as dividends is the most tax efficient way to extract profit from your company.
04
Retained Profits
Money left in the company only pays corporation tax, not income tax. This lets you smooth your income across years and only draw what you need when you need it.
Good time to incorporate
Your profit consistently exceeds £30,000 to £35,000 per year
You do not need to draw all of your profit each year
You want to protect your personal assets with limited liability
You are working with larger clients who prefer a limited company
You want to build a business with employees or investors in future
Worth considering first
Profits below £25,000 the admin costs may outweigh the saving
You need to draw all your income each month to cover personal costs
You are in a profession where limited company status brings no advantage
IR35 applies to your work this can eliminate the tax benefit
You are close to retirement and incorporation may complicate pension planning
Ready to make the switch?

Let's talk through your situation.

Every business is different. Book a free, no obligation call and we will tell you exactly whether incorporating makes sense for you and what the process looks like.

Book a Free Call See Our Pricing