Limited company v’s Sole trade

Limited company v’s Sole trade

Historically there used to be a huge difference in tax liability if you operated as a Ltd company rather than a sole trade, unfortunately from April 2016 the government have closed the gap.

When considering setting up a Ltd company or transferring your sole trade into a company you will need to consider the following


  • Separate legal definition between owners and the business. Giving them protection if the company goes into liquidation.
  • The company pays tax on its own profits at a lower rate than individuals.
  • The shareholders only get taxed when money is drawn from the company.
  • If you structure your payments from a company correctly you may pay less tax than a sole trade


  • Extra admin required for a company for example companies house require statutory forms to be filed
  • Directors or shareholders will need to be more disciplined when extracting money from the company, a payroll or dividend vouchers may need to be created.
  • Extra tax forms will be required in addition to the shareholder forms.

Each scenario needs to be considered on its own merits, please feel free to contact us for a free initial meeting for any further advice.

Related posts

Making Tax Digital for VAT

We are fast approaching the compulsory deadlines for Making tax digital. You will be required to keep digital accounting records following your VAT quarter that ends between March to May 2019. Those who are VAT registered with a taxable turnover of more than £85,000 will need to be prepared...

Read More

Let property campaign

The let property campaign has been introduced by HMRC to encourage landlords who have not declared their property income for several years to confess and put their tax affairs in order with reduced penalties. HMRC have a system in place which is identifying landlords who have not paid tax...

Read More