What are the differences between Sole Traders and Limited Companies?

The most popular business structures in the UK are sole trader and limited companies.

Sole trader

As a sole trader, you are:

• self-employed
• required to register with HM Revenue and Customs (HMRC)
• required 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

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
• 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