Employed, sole trader or limited company?
The same income can leave very different amounts after tax depending on how you are paid. Compare employed, sole trader and limited company side by side.
How this is calculated
Employed: income tax and employee National Insurance on the salary.
Sole trader: income tax and Class 4 National Insurance on the profit.
Limited company: the company pays the director's salary and employer NI on it, then corporation tax on the rest, and pays everything left as dividends. The director pays income tax and employee NI on the salary and dividend tax on the dividends.
All at 2026/27 rates for England, Wales and Northern Ireland, with no pension contributions.
Rates used · 2026/27
| Corporation tax | 19% to £50,000, 25% from £250,000, marginal relief between |
| Dividend tax | 10.75%, 35.75% and 39.35%, after a £500 allowance |
| Class 4 NI | 6% and 2% |
| Employer NI | 15% above £5,000 |
Last checked July 2026. Source: HMRC and gov.uk.
Worked example
On £60,000, an employee takes home £45,357, a sole trader £46,111, and a limited company director on a £12,570 salary with the rest as dividends £46,091. At this level the structures are close; the gap widens at higher profits and with pension contributions.
Common questions
Is a limited company always better?
Not always. Above a certain profit it often leaves more after tax, but it adds accountancy costs, admin and legal duties, and the money belongs to the company until it is paid out.
Why take a low salary and dividends?
Dividends carry no National Insurance and are taxed at lower rates than salary, though the company pays corporation tax on the profit first.
Does this include a pension?
No. Company pension contributions are often the most tax-efficient way to take money out, so the real gap can be bigger.
Should I switch to a limited company?
Take advice first. Things like IR35, mortgage applications and the costs of running a company all matter.