Should You
Go Limited?

Why "just go limited" stopped being obvious advice

For years, the standard advice was simple: once you're earning decent money, incorporate, pay yourself in dividends, and save a meaningful chunk of tax. From April 2026, that gap narrowed sharply.

• Dividend tax roseRates went up by 2 percentage points from April 2026, and the tax-free Dividend Allowance is down to just £500 a year.
• Employer National Insurance bites on director salary15% above a £5,000 threshold, and a company whose only employee is its sole director generally can't claim the Employment Allowance that would offset it.

Both changes push in the same direction, they make extracting money from a limited company more expensive than it used to be, which shifts the whole comparison.

Where the numbers land now

Roughly speaking, for 2026/27, if you draw everything you earn out of the business each year:

• Below about £50,000 profitStaying a sole trader is often the cheaper option once you account for the extra tax and admin cost of running a company.
• Roughly £55,000 to £60,000 profitThere's a narrow window where a limited company tends to pull ahead on pure tax.
• Well above thatThe advantage can narrow again unless you're leaving profit in the company rather than drawing it all, or using employer pension contributions, both of which change the maths meaningfully.

These are general ranges, not a rule for your specific situation, the actual break-even point moves with how much you draw versus retain, and whether you have a spouse you can reasonably split income with.

It's not only about tax

• Limited liabilityYour personal assets are generally protected if the business runs into serious trouble, a real reason to incorporate even when the tax case is marginal.
• Winning bigger workSome larger contractors and commercial clients simply won't contract with a sole trader, incorporating can open doors regardless of the tax maths.
• More admin either wayCompanies House filings, a CT600 return, running payroll if you take a salary, and your accounts becoming publicly visible, all real costs in time and often in accountancy fees.
• Losses work differentlyA sole trader can offset a bad year's losses against other personal income fairly flexibly, a limited company's losses are trapped inside the company and carried forward instead.