Should You Incorporate?
The answer isn't just about profit level. Pension access, spouse share-splitting, student loan exposure and how much you want to retain in the business can all flip the decision.
Compare annual cash at the profit you enter, with company-retained profit shown separately where selected. A decision to incorporate also needs a review of transfer taxes, financing and ongoing costs.
Your Inputs
What this changes
Profit after expenses but before any owner salary, dividend, or pension. The limited company result is director cash plus any profit left in the company after Corporation Tax, because money retained in the company has not yet suffered dividend tax.
What this changes
Sole trader: gross contribution into a personal pension, basic-rate band widens, so income that would have been taxed at 40% drops to 20%. Limited company: employer contribution that reduces taxable profit and Corporation Tax. Either way, the pension money sits in your scheme.
What this changes
A Ltd-only consideration. Employment Allowance cancels up to £10,500 of employer NI, but a single-director company with no other employees is excluded. When eligible, the Ltd route gains because salary above £5,000 doesn't trigger 15% employer NI on the next slice.
What this changes
Only relevant for the limited company route. If your spouse holds ordinary shares, dividends can be paid in their own name and may use their personal allowance and basic-rate band. Sole trader profits belong to one individual for tax.
What this changes
Plans 1, 2, 4 and 5 repay at 9% above the plan threshold. Postgraduate loans repay at 6%. Sole trader income is tested against profit; the limited company route tests salary plus dividends drawn.
What this changes
Both choices compare salaries across the whole funded range in whole pounds. Draw all pays out the available profit and matches the published research baseline. The other option compares drawing 0%, 25%, 50%, 75% or 100% of post-tax profit and adds retained company profit to personal cash. Future withdrawal tax is excluded.
Rates current for tax year 2026/27
These calculators are diagnostic tools intended to give you an initial estimate. They are not a substitute for personalised advice on your specific circumstances. Figures depend on the inputs you provide and on tax rules that change over time. Speak to us before acting on any result.
A CIMA Chartered Management Accountant will review your details and send you a tailored breakdown.
Excludes incorporation and ongoing administration costs. Retained company profit belongs to the company and may incur tax when withdrawn. The sole-trader figure is personal cash. Pension contributions are assumed to qualify for relief, with the same gross amount contributed under both routes. The model uses England, Wales and Northern Ireland rates, no associated companies, no spouse student loan and no annual allowance charge. Read the Owner-Manager Tax Index assumptions.