Your business

Try an example:

Profit per year before paying yourself (£)Income minus business expenses. Director’s salary (Ltd) Share of company profit taken as dividends (%)Profit left in the company isn’t taxed personally yet. Extra yearly cost of running a Ltd (£)Accountant, payroll, software. Use your own quote. Company can claim Employment Allowance (not if you are the only employee and a director)

Result (England, Wales, NI rates 2026/27)

Item	Sole trader	Limited company

How it’s worked out, and what’s not included

Income tax: Personal Allowance £12,570 (tapered over £100,000), 20% / 40% / 45% bands to £50,270 and £125,140.
Sole trader Class 4 NI: 6% on profits £12,570–£50,270, 2% above. Class 2 is no longer payable above £7,105 profit.
Ltd: employee NI 8% over £12,570; employer NI 15% over £5,000 (Employment Allowance £10,500 if eligible). Corporation tax 19% up to £50,000 profit, 25% over £250,000, marginal relief between (fraction 3/200).
Dividends: £500 allowance, then 10.75% basic, 35.75% higher, 39.35% additional rate.
Not included: Scottish rates, student loans, pension contributions, VAT, IR35, associated companies, payments on account, and the extra admin of running a company.
Sources: GOV.UK dividends, self-employed NI, employer rates 2026/27, Corporation Tax rates.

An estimate, not advice. Speak to an accountant before you incorporate.

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