Limited Company vs Sole Trader: Which Is Right for You in 2026?

The pros, cons and tax differences between operating as a sole trader and running a limited company — explained in plain English.

One of the most common questions we hear from new business owners: should I stay as a sole trader or set up a limited company? The honest answer is — it depends. Here's how to think it through.

## The Case for Staying a Sole Trader

Simplicity. Less admin, lower accountancy costs, and your profits are simply taxed as your income. For many smaller businesses, this is exactly right.

## The Case for a Limited Company

Limited liability protects your personal assets, and once profits pass a certain level, the mix of salary and dividends can be more tax-efficient. A company can also look more established to customers and lenders.

## The Tipping Point

As a rough rule of thumb, once profits pass £30k–£40k, it's worth running the numbers on incorporation. But tax is only part of the story — pension plans, mortgages and growth ambitions all play a part.

## Get a Personal Recommendation

We'll run both scenarios with your real numbers and tell you plainly which structure leaves you better off. Book a free consultation to find out.