Blue Jay Owner-Manager Tax Index
What you keep from £20,000 to £300,000 profit, how it changed from 2025/26, and what happens when you leave profit in a company or pay into a pension.
Assumptions: one owner, England, Wales and Northern Ireland Income Tax, and a company that is not eligible for Employment Allowance.
£15.33
Under the baseline assumptions, a one-owner limited company produces more current personal cash than the sole-trader route only between £60,142 and £60,506 of annual business profit. Its maximum advantage is £15.33.
£4,102
The owner keeps £69,311 as a sole trader, compared with £65,210 through the company salary-and-dividend combination that gives the most cash.
£15,974
The figures are £145,040 as a sole trader and £129,066 through a company. That company result uses a £174,565 salary.
£1,334
This is the fall from 2025/26 to 2026/27 when we use the salary giving the most cash in each year and keep business profit and the other assumptions the same.
The comparison checks profit at £1 intervals from £20,000 to £300,000. The comparison excludes accountancy and administration costs. Any additional cost of running a company compared with operating as a sole trader would reduce its cash advantage.
These findings concern current personal cash after annual taxes, with all available profit paid to the owner. They are not a universal recommendation to incorporate or remain a sole trader. Liability protection, commercial needs and plans to leave money in the company also matter.
Use our incorporation calculator to compare the sole-trader and limited-company result for your circumstances.
Every example starts with the same business profit before the owner is paid. For a company, we then deduct the director's salary and employer National Insurance before calculating Corporation Tax.
Differences are calculated from the underlying unrounded figures before being rounded to the nearest pound.
The first uses a £12,570 director salary and pays all remaining post-Corporation-Tax profit as dividends. The second tests different salary levels and shows whichever salary-and-dividend combination leaves the owner with the most personal cash that year. At lower profits the figures can be identical because £12,570 is already the salary giving the most cash under these assumptions.
The six examples do not show the small company advantage near £60,000. Checking every £1 of profit finds it between £60,142 and £60,506, reaching £15.33 at £60,249. The sole trader keeps more at all other whole-pound profits checked from £20,000 to £300,000.
Download the crossover boundary data for £60,141, £60,142, £60,249, £60,506 and £60,507, including personal cash, the difference and the salary used. These checks are also included separately in the full research data.
Salary reduces company profit but can create Income Tax and National Insurance. Dividends come from profit that has already faced Corporation Tax. As income crosses the tax bands, the balance between these costs changes.
A £12,570 salary produces the most company cash at this profit. The owner's salary is covered by the Personal Allowance; the company pays employer National Insurance and Corporation Tax, then the owner pays tax on the dividends.
| Annual amount | Sole trader | Company giving the most cash |
|---|---|---|
| Salary before personal tax | n/a | £12,570.00 |
| Employer National Insurance | n/a | £1,135.50 |
| Corporation Tax | n/a | £6,895.96 |
| Dividend before personal tax | n/a | £29,398.55 |
| Income Tax on profit or salary | £7,486.00 | £0.00 |
| Dividend tax | n/a | £3,106.59 |
| Employee National Insurance | n/a | £0.00 |
| Self-employed Class 4 National Insurance | £2,245.80 | n/a |
| Total tax and National Insurance | £9,731.80 | £11,138.05 |
| Cash the owner keeps | £40,268.20 | £38,861.95 |
A £12,570 salary produces the most company cash at this profit. The owner's salary is covered by the Personal Allowance; the company pays employer National Insurance and Corporation Tax, then the owner pays tax on the dividends.
| Annual amount | Sole trader | Company giving the most cash |
|---|---|---|
| Salary before personal tax | n/a | £12,570.00 |
| Employer National Insurance | n/a | £1,135.50 |
| Corporation Tax | n/a | £19,118.04 |
| Dividend before personal tax | n/a | £67,176.46 |
| Income Tax on profit or salary | £27,432.00 | £0.00 |
| Dividend tax | n/a | £14,536.83 |
| Employee National Insurance | n/a | £0.00 |
| Self-employed Class 4 National Insurance | £3,256.60 | n/a |
| Total tax and National Insurance | £30,688.60 | £34,790.38 |
| Cash the owner keeps | £69,311.40 | £65,209.62 |
Here the best salary is £174,565. Salary and employer National Insurance reduce the company's taxable profit to £50,000.25, close to the £50,000 small-profits limit. The saving across company and personal taxes leaves £1,012 more cash than a £12,570 salary. It still leaves £15,974 less than the sole trader.
| Annual amount | Sole trader | Company giving the most cash |
|---|---|---|
| Salary before personal tax | n/a | £174,565.00 |
| Employer National Insurance | n/a | £25,434.75 |
| Corporation Tax | n/a | £9,500.07 |
| Dividend before personal tax | n/a | £40,500.18 |
| Income Tax on profit or salary | £98,703.00 | £64,757.25 |
| Dividend tax | n/a | £15,740.07 |
| Employee National Insurance | n/a | £5,501.90 |
| Self-employed Class 4 National Insurance | £6,256.60 | n/a |
| Total tax and National Insurance | £104,959.60 | £120,934.04 |
| Cash the owner keeps | £145,040.40 | £129,065.96 |
At £150,000 profit the best salary is £5,000. The Personal Allowance has reduced because salary and dividends exceed £100,000, while a £5,000 salary avoids employer National Insurance. A low salary can also affect National Insurance credits; this calculation measures cash only. For your own figures, use the director salary and dividend calculator.
From 6 April 2026, the basic dividend tax rate rose from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. The additional rate remains 39.35%, and the dividend allowance is £500. These are the tax-rate changes affecting this comparison.
We keep business profit the same and use the salary giving the most cash in each year. At £100,000 profit, company cash falls from £66,543 to £65,210. Sole trader cash is unchanged under these assumptions. The figures are nominal pounds, without an inflation adjustment.
Taking every available pound out of a company is not the only option. Here the director takes a £12,570 salary and no dividend, leaving the remaining post-Corporation-Tax profit in the company.
| Business profit before paying the owner | Cash paid to the owner now | Profit left in the company after Corporation Tax |
|---|---|---|
| £30,000 | £12,570 | £13,199 |
| £50,000 | £12,570 | £29,399 |
| £75,000 | £12,570 | £48,801 |
| £100,000 | £12,570 | £67,176 |
| £150,000 | £12,570 | £103,926 |
| £250,000 | £12,570 | £177,426 |
Profit left inside the company is not personal spendable cash. Tax may arise later when it is taken out.
At £100,000 business profit, the owner receives £12,570 salary now while £67,176 remains in the company after Corporation Tax. That money could fund future company spending or a later dividend. This comparison does not calculate the later withdrawal.
This comparison starts with the same business profit as the main table. The company pays £20,000 directly into the owner's pension, then calculates the salary, Corporation Tax and dividends from the remaining profit.
We compare salary levels after the pension payment to find the combination giving the owner the most personal cash. The £20,000 is an illustrative contribution, not a recommended amount.
| Business profit before paying the owner | Cash the owner receives now | Pension paid by the company |
|---|---|---|
| £30,000 | £9,348 | £20,000 |
| £50,000 | £24,403 | £20,000 |
| £75,000 | £42,477 | £20,000 |
| £100,000 | £55,765 | £20,000 |
| £150,000 | £78,996 | £20,000 |
| £250,000 | £119,849 | £20,000 |
The pension is not cash available to spend today. Tax may apply when pension money is withdrawn.
We assume the contribution qualifies for Corporation Tax relief and fits within the owner's available pension allowance. Other contributions, a reduced allowance or previous pension access can change that. Individual pension allowance charges, carry-forward and future withdrawal tax are outside this model.
Employment Allowance can reduce an eligible employer's National Insurance bill by up to £10,500. A company with only one director who is also its only employee liable for employer National Insurance cannot claim it.
This separate comparison assumes the company qualifies and the entire allowance is available against the owner's salary. Profit is measured after any other staff costs. We do not add the cost of hiring someone or claim that hiring would pay for itself.
The cash difference does not rise steadily with profit. We compare salary levels separately with and without the allowance, so personal tax bands and the Personal Allowance taper change both results. The Employment Allowance chart shows that variation across the full published range.
We assume one shareholder and one director, appointed for the whole tax year, below State Pension age and paying standard category A National Insurance. There is no other personal income, student loan, associated company or accountancy/admin cost. Tax calculations use England, Wales and Northern Ireland Income Tax rates. Scottish Income Tax is not included in this edition.
Each comparison starts with annual taxable business profit before owner salary, employer National Insurance or company pension contributions. The company has a 12-month accounting period aligned with the tax year. We assume all salary, employer National Insurance and pension costs qualify for deductions, with no trading losses, exempt distributions or brought-forward reserves. Dividends are limited to current-year distributable profit.
The Personal Allowance is £12,570, reduced by £1 for every £2 of adjusted net income over £100,000 and exhausted at £125,140. The basic taxable band is £37,700. Salary is taxed before dividends, but the allowance is allocated between them in the way that gives the lowest total Income Tax for these years. The £500 dividend allowance is a nil-rate band: those dividends still use tax bands and count towards the allowance taper.
Director National Insurance uses the annual earnings method. Employee contributions are 8% between £12,570 and £50,270 and 2% above that. Employer contributions are 15% above £5,000, with no Employment Allowance in the main comparison. Sole traders pay Class 4 contributions at 6% between £12,570 and £50,270 and 2% above that. No compulsory Class 2 payment arises at the profits covered here.
Corporation Tax is 19% up to £50,000 taxable company profit and 25% from £250,000. Between those limits, we calculate 25% of taxable profit less 3/200 of the difference between £250,000 and that profit. With no associated companies or exempt distributions, this gives a 26.5% marginal rate within that band.
Allowed salaries run from £0 to the largest whole-pound salary the company can fund after employer National Insurance and any pension payment. All remaining post-Corporation-Tax profit is paid as dividends. For each allowed salary, personal cash is salary plus dividend, less salary Income Tax, dividend tax and employee National Insurance.
We find the salary-and-dividend combination that leaves the owner with the most cash, accounting for changes at each tax threshold. A separate calculation checks every fundable whole-pound salary for each published company comparison that varies salary. Equal cash results select the lower salary. This comparison does not require a minimum salary for State Pension credits or assume a minimum-wage employment contract.
When profit stays in the company, the owner takes a £12,570 salary and no dividend. The pension comparison contributes £20,000, then uses the salary giving the most personal cash and pays the remaining distributable profit as dividends. At the £20,000 lower limit the whole profit can fund the pension and no salary remains. We assume sufficient pension allowance and no other pension input; later withdrawals, investment growth and tax charges arising from individual pension restrictions are excluded. Cash, company profit and pension contributions are reported separately.
Calculations retain precision until each amount is rounded to two decimals. Headline tables round to the nearest pound; differences are calculated before that display rounding, so subtracting two displayed amounts can differ by £1. Component rounding can also leave a penny difference in worked examples. Effective tax is total tax and National Insurance divided by starting business profit. We compare annual liabilities, ignoring payment dates, payments on account and payroll rounding by pay period.
The published figures cover 57 profit levels from £20,000 to £300,000 in £5,000 steps, with six comparisons for each of 2025/26 and 2026/27. We chose these consecutive years because both use stable annual director National Insurance rates. The comparison holds nominal profit constant and makes no claim about inflation-adjusted purchasing power.
Every published result was independently cross-checked against a separately built calculation model. The checks cover each tax, the salary giving the most cash, and the reconciliation of business profit to personal cash, profit left in the company, pension contributions and tax.
We compared company and sole trader cash from £20,000 to £300,000 profit at £1 intervals. Separate calculations checked the crossover points, every whole-pound profit from £58,000 to £63,000, and selected profits around other tax thresholds. These checks do not cover every possible penny of profit or salaries specified in pence. The validation note explains the coverage. These are calculation checks carried out by Blue Jay, not an external professional review.
personal allowance, England/Wales/Northern Ireland income tax bands, dividend allowance and dividend tax rates
employee National Insurance, employer National Insurance, Employment Allowance and Class 4 National Insurance
Corporation Tax small profits rate, main rate, marginal relief limits and standard fraction
Most beneficial allocation of Personal Allowance; dividends taxed above salary.
Annual earnings basis for a director appointed for the full tax year.
Single-director exclusion and the separate eligibility comparison.
Employer contributions count towards pension allowances; individual restrictions apply.
Annual Class 1 thresholds, category A rates and Employment Allowance.
Annual Class 1 thresholds, category A rates and Employment Allowance.
These figures may be quoted or reproduced with attribution to Blue Jay Accountants and a link to this page. Please retain the stated assumptions when citing individual figures.
Blue Jay Accountants, "Sole Trader vs Limited Company Tax 2026/27", Blue Jay Owner-Manager Tax Index, September 2026. https://bluejayaccountants.co.uk/research/owner-manager-tax-index/
"Analysis by Blue Jay Accountants found..."
2026/27 Owner-Manager Tax Index. Data checked: 5 September 2026. First published: 6 September 2026.
If we identify a material error after publication, we will correct the affected figures, explain what changed and retain enough edition information for previous citations to be understood.
Try different pension payments, personal circumstances and amounts left in the company with the incorporation calculator.
Compare your figuresCheck company tax with the Corporation Tax calculator, or read about when to incorporate.
We also explain our accounting work for limited company directors and sole traders, and how we approach tax planning.
