Limited company vs Sole trader. What's the difference?

The most popular business structures in the UK are sole traders and limited companies . When starting a business, great consideration is required when deciding on what business structure to choose. 

Sole trader

As a sole trader, you are:

  • self-employed  
  • to register with HM Revenue and Customs (HMRC)
  • to keep all your company's profits once you've paid tax on them
  • responsible for any losses your business makes 
  • required to file tax returns 
  • required to pay income tax and national insurance
  • not liable to pay accounts like a UK company

Register as a sole trader

Limited company

As a limited company, you need:

  • directors and shareholders or members
  • to be registered with Companies House and HMRC
  • to have a registered office address
  • to file annual accounts and confirmation statements
  • to pay corporation tax and tax returns, and you can
  • potentially can save more tax than a sole trader

Set up a UK company

Please note, this article is an overview and so we recommend you to seek professional advice before starting a business.

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