Sole Trader vs Ltd at £50k, £75k & £100k Profit (2026/27)
There is no universal profit level at which a limited company becomes better. These three scenarios show why the salary, dividend and cash-extraction assumptions matter more than a headline threshold.
By SoloCalc · Content updated 23 October 2026
A like-for-like starting point
Each figure is business profit before owner salary, employer NI or Corporation Tax, after other allowable operating expenses. We use England, Wales and Northern Ireland personal tax rules for 2026/27, no other income and no pensions. For the company: one owner-director/shareholder, a 12-month accounting period, no associated companies and all post-tax profit distributed as dividends in the same tax year. Dividends require sufficient distributable profits; this is not permission to pay them.
The director salary is £12,570.00 in every scenario. It is a transparent assumption, not an optimised recommendation. No Employment Allowance is claimed: the model assumes the director is the only employee liable for employer NI. Accountancy and extra administration costs are excluded on both sides; include your actual relevant costs before deciding.
How much reaches the owner?
| Starting profit | Sole-trader take-home | Company owner take-home | Company minus sole trader |
|---|---|---|---|
| £50,000.00 | £40,268.20 | £38,861.95 | -£1,406.25 |
| £75,000.00 | £54,811.40 | £53,403.69 | -£1,407.71 |
| £100,000.00 | £69,311.40 | £65,209.63 | -£4,101.77 |
Under these specific assumptions the sole trader keeps more in all three examples, before any additional company running costs. That does not establish the best legal structure for you. A retained-profit strategy, different salary, pensions, other income or other employees creates a different comparison. Run your figures in the sole trader vs limited company calculator; it does not model every alternative strategy.
Where the company money goes
| Starting profit | Employer NI | Company taxable profit | Corporation Tax | Dividends | Personal dividend tax |
|---|---|---|---|---|---|
| £50,000.00 | £1,135.50 | £36,294.50 | £6,895.96 | £29,398.54 | £3,106.59 |
| £75,000.00 | £1,135.50 | £61,294.50 | £12,493.04 | £48,801.46 | £7,967.77 |
| £100,000.00 | £1,135.50 | £86,294.50 | £19,118.04 | £67,176.46 | £14,536.83 |
Company taxable profit is starting profit minus salary and employer NI. Corporation Tax is then deducted before dividends; personal dividend tax is another layer. Here salary is covered by the Personal Allowance and employee NI is zero. Owner take-home is salary plus dividends less personal taxes and employee NI, not profit minus Corporation Tax alone.
Why the three cases differ
- £50,000: company taxable profit after salary and employer NI is below the £50,000.00 small-profits limit. The limit concerns company taxable profit, not turnover or the owner's starting profit.
- £75,000: company taxable profit falls into the marginal-relief range. With these ordinary-profit assumptions, the engine applies relief between £50,000.00 and £250,000.00; it does not simply charge the small-profits rate on everything.
- £100,000: more dividends occupy the higher dividend band. For 2026/27, the dividend rates are 10.75%, 35.75% and 39.35%. The £500.00 dividend allowance still uses band space.
Do not confuse total business profit with the director's adjusted net income. Personal Allowance tapering depends on personal income and applicable adjustments, not automatically the company profit headline. Read the £50,000 sole-trader tax walkthrough for the personal-tax side.
Questions a tax table cannot settle
- How much cash do you need personally, and when? Retained profit is not spendable personal take-home.
- What additional accounting, payroll, filing and legal obligations will you have? A company has separate finances and director responsibilities.
- Are IR35, associated companies, other shareholders, pensions or different accounting periods relevant? They are outside this illustration.
- Would your employment income, Scottish tax status or student loans change the outcome? This comparison excludes those specialist interactions.
Use the self-employed tax calculator and tax savings calculator for sole-trader planning, but do not add overlapping calculator bills together. For definitions see which income figure to use. Get individual professional advice before incorporating or changing how you pay yourself.
Official sources and scope
- GOV.UK: Corporation Tax rates and allowances
- GOV.UK: Marginal Relief for Corporation Tax
- GOV.UK: Rates and thresholds for employers 2026 to 2027
- GOV.UK: Tax on dividends
- GOV.UK: Employment Allowance (who cannot claim)
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Self-employed National Insurance rates
- GOV.UK: running a limited company
General tax illustration only, not tax, legal or financial advice. Figures use the tested 2026/27 comparison engine, rounded to pennies. No promised tax saving or incorporation threshold is implied.