Which is right for you — sole trader or limited company?

Run five factors against your own numbers. (1) Profit — under ~£30k, lean sole trader; £50k+, the company case strengthens; in between it depends on the extras. (2) Risk/liability — meaningful business risk, debt or contracts push toward a company regardless of the tax line. (3) Retention — if you'll reinvest or leave profit in the business, the company's 19% retention rate is a real advantage. (4) Pension and family — big pension contributions or a spouse with unused allowances both favour a company. (5) Exit — if you might sell or pass the business on, a company is usually the more tax-efficient vehicle. The right answer is the one your actual numbers and goals point to — which is exactly what an accountant works out.

Sometimes, yes — limited liability can be the deciding factor on its own, even when the tax maths is neutral. If your business carries real risk — significant debt, large customer contracts, work that could lead to a claim, employees, property — the protection of a limited company can matter more than the tax case for or against. It isn't bulletproof (directors can still be personally liable for fraud, wrongful trading, personal guarantees, and unpaid taxes in some cases) but for everyday commercial risk it's a real shield. If liability is your driver, the company case stands even at lower profit levels.

If you have low profit, low risk and no plans to retain or sell, stay a sole trader. If you have higher profit, real liability exposure, plans to reinvest or sell, or want to use pension and family allowances properly, incorporate. The middle ground — profitable, lower-risk, no exit plans — is where it stops being a rule of thumb and needs the actual numbers run. The April 2026 dividend tax rise narrowed the simple-extraction tax gap, so for 2026/27 the non-tax reasons (liability, retention, pensions, family, exit) are doing more of the work than they used to.

Yes — and significantly. If you contract via a limited company and you're caught inside IR35, most of the tax advantages of incorporating disappear: the deemed-employment rules tax the contract income broadly like employment, so the salary/dividend split, retention and pension headroom shrink. For contractors stuck inside IR35 on the bulk of their work, the admin overhead of running a limited company is doing work it isn't being rewarded for. Outside IR35 — or where only some engagements are caught — the company case still stands. See our IR35 guide for the test and the practical impact.

Usually no. Pre-profit, the company costs more than it saves — corporation tax filings, Companies House filings, statutory accounts, PAYE if you draw a salary, and an accountant fee that is structurally higher than for a sole trader. Until there's profit to extract, you're paying the running costs of a company for no tax benefit. The exceptions are (1) liability — you genuinely need limited liability from day one because of the contract or risk profile, (2) credibility — clients or partners require a company, and (3) you'll have profit fast enough that the year-one cost is paid back inside the first 12 months.

At least annually, and whenever something material changes — profit jumps past £30k or £50k, you start retaining serious cash, you take on staff or commercial property, you start contracting (IR35 question), your spouse stops or starts work, you're planning a sale, or your tax position changes. The crossover moves every April with the new rates — the April 2026 dividend rate change moved it, and future rate changes will move it again. The right structure for a £40k freelancer with one client is rarely the right structure for the same person three years later doing £200k with three staff. The decision is a review, not a one-off.

A general partnership is essentially two or more sole traders sharing one business — same tax treatment, same unlimited liability, slightly more admin (a partnership tax return, profit-share agreement). It's not really a tax middle ground; the partners are still taxed personally on their share of profit. A limited liability partnership (LLP) adds the liability shield of a company but keeps the partnership tax treatment (partners taxed personally on their share). LLPs suit professional firms — accountants, solicitors, consultancies — where partners want personal tax treatment plus liability protection. For most owner-managed trading businesses, the real choice is still sole trader versus limited company.

Yes — that's exactly the kind of work a qualified accountant should be doing. A good firm runs the comparison on your actual numbers (this year's profit, next year's projection, your goals), factors in the non-tax considerations (liability, pension, family, exit), checks IR35 if relevant, and gives you a recommendation with the workings shown. They'll also tell you the right time to change rather than treating it as a one-off decision. RR Accountants does this as a structure review — and handles the corporation-tax side of incorporating if the answer turns out to be "yes, switch."