Most UK freelancers stay as sole traders. Some incorporate. Here's how to know which side you're on.
The basics
| Factor | Sole Trader | Limited Company |
|---|---|---|
| Liability | Personal — your assets are on the line | Limited to company assets |
| Tax | Income tax + Class 2/4 NI | Corporation tax + dividend tax |
| Admin | Self-Assessment once a year | Year-end accounts + Confirmation Statement |
| Privacy | Income private | Filings public on Companies House |
| Cost to run | ~£0–£500/yr | ~£500–£1,500/yr (accountant + filings) |
The tax math
Roughly:
- Up to ~£30k profit — sole trader is simpler and usually cheaper after admin
- £30k–£50k — break-even, depends on whether you can leave profit in the company
- £50k+ — Limited Company usually wins, especially if you don't need all the cash personally
Beyond tax
- Credibility — some agencies and large clients only contract with Ltd companies
- IR35 — if you work for one big end-client, IR35 may apply regardless
- Future-proofing — easier to bring on co-founders or sell a Ltd company
How to decide
If you're under £30k profit and not bothered about liability: stay sole trader. Above £50k or wanting limited liability: incorporate.
Ledgerly Pro supports both. Switch your accounting type anytime in Settings → Business.