Thrivelance Tools
Find the profit level where incorporating starts to pay. We compare your take-home as a sole trader (income tax + Class 4 NI) against a limited company (corporation tax + a tax-efficient salary and dividends) for 2025/26.
Same annual profit, taxed two ways. Figures update as you type.
Sole trader take-home
£0
Income tax + Class 4 NI.
Limited company take-home
£0
Salary + dividends after tax.
Better off by
£0
| Tax component | Sole trader | Limited company |
|---|---|---|
| Income tax | ||
| Class 4 National Insurance | — | |
| Corporation tax | — | |
| Dividend tax | — | |
| Effective tax rate |
A sole trader pays income tax and Class 4 NI on all profit. A company pays corporation tax on profit, then you draw a small salary plus dividends — and dividends are taxed at lower rates than salary with no NI. The gap widens as profit rises.
Below roughly £30,000–£40,000 profit the saving is small and often outweighed by a company's running costs. Many freelancers find incorporation worthwhile once profit comfortably clears the higher-rate threshold. Slide your profit up and down to see where it flips for you.
It models a single director taking salary + dividends, England/Wales/NI rates, and no other income or pension contributions. It excludes the costs of running a company, VAT, and reliefs like the marginal corporation-tax band's interaction with other income. Confirm with an accountant.
See your employed take-home in the UK Salary Calculator, or the income-tax-only figure with the PAYE Calculator. Hiring? Check the employer cost in the True Cost of an Employee Calculator.
Common questions about this calculator.
It varies, but the saving is usually small below about £30,000–£40,000 of profit and is often cancelled out by a company's running costs. The advantage grows as profit rises above the higher-rate threshold. Enter your profit to see the exact difference.
A company pays corporation tax (19% rising to 25%), then you take a small salary within your personal allowance plus dividends. Dividends are taxed at 8.75%, 33.75%, or 39.35% with no National Insurance, which is usually lower overall than income tax plus Class 4 NI on the same profit.
A director's salary of £12,570 — the personal allowance — which incurs no income tax and only a little employer NI, and is deductible for corporation tax. The rest of the profit is taken as dividends.
From 2024/25, self-employed people with profits above the Small Profits Threshold no longer pay mandatory Class 2 NI and still build their State Pension record, so it's excluded here. Class 4 NI still applies for sole traders.
Company accountancy and filing fees (often £1,000–£2,000 a year), VAT, the loss of privacy from public accounts, and any other income or pension contributions. This is a tax comparison only — weigh the running costs and confirm with an accountant.
