Should I go limited or stay a sole trader?
Updated 5 June·7 min read
Yes, if…
- ✓Profits are comfortably into five figures and rising
- ✓You want personal liability protection
- ✓Clients or contracts require a limited company
No, if…
- ✕Profits are still modest
- ✕You value simple admin and one tax return
- ✕You don't need liability protection yet
The reasoning
Sole trader is the simplest setup: one Self Assessment, no Companies House filing, full control. For most new and small businesses it's the right starting point.
A limited company can save tax at higher profits and limits your personal liability, but it adds accounts, filings and cost. The crossover depends on your numbers.
Switching later is straightforward. There's rarely a rush - incorporate when the tax maths or the risk clearly justifies it, not because it sounds more serious.
What’s new on this question
5 Jun 2026Dividend allowance held at its current level
22 May 2026Companies House filing fees updated
30 Apr 2026Corporation-tax small-profits rate confirmed
What you can do this week
- ✓Estimate this year's profit and next year's
- ✓Ask an accountant for the crossover point for your numbers
- ✓Only incorporate when tax saving or liability clearly justifies it
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Luca Bonura
Founder & Editor
Self-taught marketer who started selling online at 17 and went on to freelance for brands across Europe before founding Adlarion. He writes The Small Business Digest in plain English - the news he wishes he'd had when he was starting out.
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