United Kingdom
Choosing between sole trader and limited company
Tax is only one input. Liability, credibility, admin cost and how you plan to exit all change the answer.
9 April 2026 · 7 min read · By the Meridian team
The tax crossover point moves
Below roughly £30,000 of profit, incorporation rarely pays for itself once accountancy fees, Companies House filings and payroll are counted. Between £40,000 and £60,000 a salary-plus-dividend structure usually wins by a few thousand pounds. Above that the gap widens, but corporation tax marginal relief and dividend rates change often enough that the calculation deserves a fresh look each year.
Limited liability is not absolute
A company separates your personal assets from business debts, but directors who give personal guarantees to lenders or landlords, or who trade while insolvent, remain exposed. Treat the protection as real but conditional on running the company properly.
Credibility and contracts
Some clients, particularly enterprise procurement teams and public sector buyers, will only contract with an incorporated supplier. If your growth plan depends on that customer segment, the decision is commercial before it is fiscal.
Think about the exit at the start
Selling a sole trade means selling assets and goodwill. Selling a company means selling shares, which is usually cleaner and often more tax-efficient for the seller. If there is any chance of a sale or of bringing in an investor, incorporate early — restructuring later costs more.