Should a tradesperson be a sole trader or a limited company?

Should a tradesperson be a sole trader or a limited company? It depends on your profit, how you pay yourself and the paperwork. In 2026-27, sole traders pay Income Tax and National Insurance on profit; companies pay 19% to 25% Corporation Tax, then you pay tax on what you draw. No. In the simplified £45,000 example on this page, with all profit paid out as dividends, the company route costs more tax in 2026-27. The answer changes with your profit, how you pay yourself and what you leave in the company. 19% on profits of £50,000 or less, and 25% on profits over £250,000. Between the two, the company may be entitled to Marginal Relief. The first £500 is covered by the dividend allowance. Above that, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. Read the full answer, with every source, at rightotax.co.uk.