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For builders, plumbers, electricians and other trades · 2026/27

Sole trader or limited company? The 2026/27 answer for tradespeople

The short answer

If you take all the profit out, staying a sole trader usually leaves you slightly better off in 2026/27. At £100,000 profit, a sole trader keeps £69,311 and a limited company director £65,210. A company pays off when you leave profit in the business, or need limited liability or a company to win contracts.

Calculator

Sole trader vs limited company calculator

Enter your yearly profit to compare take-home pay. For the company, we test the two usual director salaries and use whichever leaves you more.

Sole trader take-home

£40,268

Limited company take-home

£38,139

Salary £12,570 + dividends £28,589

A sole trader leaves you about £2,129 a year better off.

2026/27Sole traderLimited company
Profit£50,000£49,000
Corporation Tax–£6,706
Employer National Insurance–£1,136
Your National Insurance£2,246£0
Income Tax (incl. dividend tax)£7,486£3,020

Estimate only, not tax advice. Uses 2026/27 rates for England, Wales and Northern Ireland, assumes all company profit is paid out as dividends, and ignores pensions, student loans and other income. Profit shown for the company is after the extra costs you entered.

Worked examples

Take-home pay at different profits, 2026/27

All profit taken out; no extra accountancy costs added for the company.

ProfitSole trader keepsLimited company keepsDifference
£30,000£25,468£24,403Sole trader +£1,065
£50,000£40,268£38,862Sole trader +£1,406
£80,000£57,711£55,765Sole trader +£1,947
£100,000£69,311£65,210Sole trader +£4,102
£150,000£92,040£85,321Sole trader +£6,719

When a company pays off

When is a limited company worth it for a tradesperson?

  • You don't need all the profit. Money left in the company is taxed at 19% Corporation Tax (on profits up to £50,000) instead of 40% higher-rate Income Tax, so it can fund a new van, tools or a quiet winter.
  • Pension contributions. Company pension payments can reduce Corporation Tax and avoid National Insurance. Work out your own split with the salary and dividend calculator.
  • Limited liability. Company debts are usually the company's, not yours, though personal guarantees and negligence claims can still reach you.
  • Bigger contracts. Some main contractors, developers and councils prefer or require a limited company.

CIS

CIS: sole trader vs limited company

On construction work, contractors deduct 20% from payments for your labour under the Construction Industry Scheme (30% if you aren't registered).

As a sole trader you get it back through Self Assessment, often months later. A limited company can set CIS deductions against the PAYE and National Insurance it owes each month, which is easier on cash flow. With gross payment status nothing is deducted at all. Work out yours with our CIS calculator.

330,436 home-improvement businesses in the UK trade as limited companies (Companies House, September 2026). See which trades are growing fastest and what each trade earns.

At a glance

Key differences

Sole traderLimited company
Tax on profitIncome Tax 20–45% plus Class 4 NI 6%/2%Corporation Tax 19–25%, then tax on salary and dividends you take
LiabilityYou are personally liable for business debtsUsually limited to the company, unless you give personal guarantees
AdminRegister with HMRC, one Self Assessment returnCompanies House accounts and confirmation statement, Corporation Tax return, payroll
CIS deductionsReclaimed through Self AssessmentOffset against monthly PAYE and NI
PrivacyBusiness details stay privateName, directors and accounts are public on Companies House
Closing downSimply stop trading and tell HMRCStrike off or liquidate the company (how strike-off works)

Sole trader vs limited company FAQs

On 2026/27 tax rates, if you take all the profit out of the business, a sole trader usually keeps slightly more. At £50,000 profit a sole trader takes home £40,268 against £38,862 through a limited company. A company can still make sense if you leave profit in the business, want limited liability, or win work that needs a company.

There is no longer a clear tipping point on tax alone. With dividend tax at 10.75% and employer National Insurance at 15%, taking all profit out of a company doesn't beat being a sole trader at any profit level in 2026/27. The case for a company rests on profit you don't need to draw, which is taxed at 19% Corporation Tax (on profits up to £50,000) rather than 40% higher-rate Income Tax.

Under the Construction Industry Scheme, contractors deduct 20% (or 30% if you're not registered) from payments for your labour. A sole trader gets it back through their Self Assessment tax return. A limited company can set CIS deductions against its monthly PAYE and National Insurance bill, which helps cash flow. With gross payment status, nothing is deducted.

Companies pay Corporation Tax on profit, not Income Tax, and directors usually take a small salary plus dividends. But the money is taxed again when you take it out as dividends. Once both layers are added up, the total is often similar to or more than a sole trader pays, unless profit is left in the company.

More admin and cost: annual accounts and a confirmation statement at Companies House, a Corporation Tax return, running payroll, and usually higher accountancy fees. Your company details and accounts are public, and if filings are late the company can be fined or struck off.

Limited liability means the company's debts are usually not your personal debts. But directors often sign personal guarantees for loans, vans and trade accounts, and you can still be personally liable for negligence or wrongful trading. Good public liability insurance matters either way.

General information using 2026/27 rates for England, Wales and Northern Ireland, not tax advice. Scottish Income Tax bands differ. Speak to an accountant before changing how you trade.