Structure comparison
Sole Trader vs Limited Company: Tax Comparison (2026/27).
Where £60,000 of profit goes
Same profit, two structures. The longer blue bar keeps more.
Sole trader
Take-home
£46,111
Effective rate
23.1%
- Income Tax
- £11,432.00
- Class 4 NI
- £2,456.60
- Total tax
- £13,888.60
- Take-home
- £46,111.40
Limited company (optimal)
Take-home
£46,091
Effective rate
23.2%
- Director salary
- £12,570.00
- Employer NI
- £1,135.50
- Corporation Tax
- £8,795.96
- Dividend Tax
- £3,977.34
- Total tax
- £13,908.80
- Take-home
- £46,091.20
The limited company structure costs £20.20 more per year at this profit level.
This comparison uses the optimal salary + dividends structure for a sole director. Actual savings depend on your business expenses, pension contributions, family shareholding and other factors. Countify can model your exact situation.
Source: gov.uk Corporation Tax rates. Rates for the 2026/27 tax year.
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Expert help
Turn your estimate into the right tax decision.
A calculator can model the numbers. Our accountants can check the assumptions, explain the options and handle the return or payroll work for you.
Ask an accountantQuestions
Frequently asked
questions.
Is a limited company always more tax-efficient than sole trader?
No. It depends on the profit level, how much cash you need personally and the extra admin costs. A limited company often becomes advantageous around £30,000 to £35,000 of profit once accounting costs are factored in.
What salary should a director take in 2026/27?
A salary of £12,570 sits at the personal allowance and the employee NI primary threshold, so there is no income tax and no employee National Insurance. A small employer NI charge of around £1,135 still applies above the £5,000 secondary threshold for sole-director companies that cannot claim Employment Allowance.
Does the comparison include accounting fees?
No. You should usually add £1,000 to £2,500 per year for limited company accounts, depending on complexity and the level of support needed.
Can I split shares with a spouse to reduce dividend tax?
Yes, with proper structuring. The arrangement must be commercially and legally sound, and Countify can advise on settlement legislation and the correct share structure.
When does it make sense to incorporate?
It typically makes sense when profit consistently exceeds £35,000 to £40,000 and you do not need to extract all profit personally each year.
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