OneTaskBy Tim King · Updated
Sole Trader vs Limited Company Calculator
Compare Take-Home Pay as Sole Trader or Salary Plus Dividends, With Your Rates
OneTask is free, with no sign-up, and built by one person.
If this tool saved you time, a coffee helps keep new ones coming.
How the Sole Trader vs Limited Company Calculator works
This sole trader vs limited company calculator runs one year's profit through both structures side by side. As a sole trader the profit is taxed as your income. As a company it pays you a salary, pays corporation tax on what is left, and pays the rest to you as dividends. You enter every rate, so the comparison stays right when the rules change.
How the sole trader vs limited company calculator works
Sole trader take-home is profit minus your effective income tax and National Insurance. On the company side, your salary and the employer NI on it come off first, then the extra running costs. Corporation tax is charged on what remains and the balance is paid out as dividends, taxed at your effective dividend rate.
Finding your effective rates
An effective rate is the total tax divided by the income it applies to, not the top band rate. For example, if your income tax would be 9,000 on 60,000 of profit, your effective rate is 15%. Your accountant, last year's tax return or your tax authority's own calculator will give you each figure.
What the calculator leaves out
It assumes all profit is paid out each year. Leaving money in the company, pension contributions, expenses and allowances that only a company can claim, and the extra admin of filing accounts can all change the answer. Treat the result as a first look and confirm the decision with an accountant.
The formula behind the comparison
Sole trader take-home = profit × (1 − income tax rate − NI rate). Company take-home = salary − tax on salary + dividends − dividend tax, where dividends = (profit − salary − employer NI − running costs) × (1 − corporation tax rate).
Worked example 1: with corporation tax at 19% and dividend tax at 10%, each 100 of company profit paid as a dividend leaves 100 × 0.81 × 0.9 = 72.90, an overall rate of 27.1%.
Worked example 2: at 25% corporation tax and 30% dividend tax, 100 becomes 100 × 0.75 × 0.7 = 52.50, an overall rate of 47.5%. Compare that figure with your sole trader rate to see which side is likely to win.
The table shows how many pence in each pound of profit go in tax once corporation tax and dividend tax are combined.
Combined tax on profit paid out as dividends, by corporation tax and dividend tax rate.
| Corporation tax | Dividend tax 10% | Dividend tax 20% | Dividend tax 30% | Dividend tax 40% |
|---|---|---|---|---|
| 5% | 14.5% | 24.0% | 33.5% | 43.0% |
| 6% | 15.4% | 24.8% | 34.2% | 43.6% |
| 7% | 16.3% | 25.6% | 34.9% | 44.2% |
| 8% | 17.2% | 26.4% | 35.6% | 44.8% |
| 9% | 18.1% | 27.2% | 36.3% | 45.4% |
| 10% | 19.0% | 28.0% | 37.0% | 46.0% |
| 11% | 19.9% | 28.8% | 37.7% | 46.6% |
| 12% | 20.8% | 29.6% | 38.4% | 47.2% |
| 13% | 21.7% | 30.4% | 39.1% | 47.8% |
| 14% | 22.6% | 31.2% | 39.8% | 48.4% |
| 15% | 23.5% | 32.0% | 40.5% | 49.0% |
| 16% | 24.4% | 32.8% | 41.2% | 49.6% |
| 17% | 25.3% | 33.6% | 41.9% | 50.2% |
| 18% | 26.2% | 34.4% | 42.6% | 50.8% |
| 19% | 27.1% | 35.2% | 43.3% | 51.4% |
| 20% | 28.0% | 36.0% | 44.0% | 52.0% |
| 21% | 28.9% | 36.8% | 44.7% | 52.6% |
| 22% | 29.8% | 37.6% | 45.4% | 53.2% |
| 23% | 30.7% | 38.4% | 46.1% | 53.8% |
| 24% | 31.6% | 39.2% | 46.8% | 54.4% |
| 25% | 32.5% | 40.0% | 47.5% | 55.0% |
FAQ
Is a limited company always cheaper than being a sole trader?
No. A company adds corporation tax, employer National Insurance on salary and running costs, and dividends are taxed again. At lower profits a sole trader often keeps more, and the gap can be small at any level.
What salary should a company director take?
Many directors take a small salary near the point where employee tax and NI start, then take the rest as dividends. Try different salaries here to see how the take-home changes at the rates you enter.
Why does the calculator not include current tax rates?
Tax rates, bands and allowances change most years and differ between countries, so built-in figures go out of date. Entering your own rates means the comparison matches your situation and the current rules.
See also: all Loans & Savings tools, Everyday Maths, Dates & Time, Health, Home & DIY, Unit Converters, Education, Science, Creative, Garden & Farm, Gaming & PC, Work & Business, Fun, Maps & GPS, DIY & Building, Cost Estimators, Sport & Clubs.
Related tools
Profit Margin Calculator
Gross margin from cost and price, or the price for a target margin.
Runway Calculator
Months of cash left from balance, burn and revenue growth.
Dividend Calculator
Dividend yield, income per payment and reinvestment growth.
Pro-Rata Salary Calculator
Part-time gross pay and holiday from a full-time salary.
Freelance Rate Calculator
Target income to hourly and day rate, adjusted for real billable hours.