LoadingLoadingLoadingLoadingEnter your annual business profit. We'll show you side by side what a sole trader would take home vs a limited company drawing the standard salary-plus-dividends combination. UK 2025/26 tax bands and 2024/25 NI changes baked in.
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The limited company side assumes an optimal director salary at the £12,570 personal allowance, employer NI at 15% above the £5,000 secondary threshold, corporation tax with marginal relief between £50k and £250k, and the remaining profit drawn as dividends with the £500 dividend allowance.
Sole trader take-home
£46,111.40
Limited company take-home
£46,831.17
Difference at this profit level
£719.77 in favour of limited company
Indicative comparison only. Assumes the optimal salary-plus-dividends structure for a sole-director limited company with no Employment Allowance, no pension contributions, no student loan, and no other income. The personal allowance taper above £100,000 is applied. Tax planning is personal — always check with an accountant before making the decision.
The general rule of thumb that 'limited companies are more tax-efficient' has gotten less true every year since 2016. The dividend allowance has shrunk from £5,000 to £500, dividend tax rates have gone up, and 2024's NI changes for the self-employed (Class 2 abolished, Class 4 cut from 9% to 6%) closed the gap further. The crossover where a limited company starts beating a sole trader is real, but it's higher than most people think.
Beyond the headline take-home, there are reasons people choose ltd that don't show up in this calculator — limited liability, pension contributions through the company, the option to retain profit and pay it out in a lean year, splitting income with a spouse who's a shareholder. And reasons people stay sole trader — simpler accounts, no Companies House filings, ability to use the trading allowance and cash basis. The take-home figure is one input, not the answer.
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