Start Something · Explainer
Sole trader or limited company?
Most people start as a sole trader. Here’s when a limited company starts to make sense.
| Sole trader | Limited company | |
|---|---|---|
| Cost to set up | Free — register for Self Assessment | £100 online at Companies House, then £50 a year |
| Tax on profits | Income tax plus Class 4 NI (6% between £12,570 and £50,270, 2% above) | Corporation Tax: 19% on profits up to £50,000, up to 25% above; then tax on what you take out |
| If it goes wrong | You’re personally responsible for business debts | The company is responsible; your personal money is usually separate |
| Paperwork | One Self Assessment return a year (quarterly updates under Making Tax Digital once over the threshold) | Company accounts, Corporation Tax return, confirmation statement, your own tax return |
| Privacy | Your business isn’t on a public register | Directors are listed publicly at Companies House |
TL;DRStart as a sole trader if you’re testing an idea — it’s free and simple. Limited companies make more sense as profits grow or risk increases. An accountant can run your numbers.
5 Octis the deadline to register for Self Assessment after the tax year you started trading in.GOV.UK
£90,000turnover in 12 months is when you must register for VAT.GOV.UK
£50,000qualifying income is when Making Tax Digital quarterly updates started in April 2026. It drops to £30,000 in April 2027 and £20,000 in April 2028.GOV.UK
Receipts · checked 9 November 2026
- GOV.UK — Set up as a sole trader
- GOV.UK — Companies House fees — £100 to incorporate online
- GOV.UK — Corporation Tax rates
- GOV.UK — Self-employed National Insurance rates
- GOV.UK — Register for Self Assessment
- GOV.UK — VAT registration — £90,000 threshold
- GOV.UK — One year until Making Tax Digital for Income Tax