Sole Trader vs Limited Company | Barton Accountancy

Which structure?

Three things matter most: tax, risk, admin.

This is one of the most common questions we get from people thinking about starting a business or changing an existing one. There's no universal answer — the right structure depends on your profit level, your appetite for admin, and how much personal risk you're willing to take.

Here's a straight comparison, with no bias either way. We genuinely don't mind which you pick — we run both types of clients. We just want you to pick with your eyes open.

The comparison

The key differences.

Everything is included in your fixed monthly fee. No extras, no surprises.

Tax: sole trader

Income tax (20-45%) + Class 2/4 NI on profits. Simple, but personal rate climbs quickly.

Tax: limited company

Corporation tax (19-25%) on profits, then income tax on dividends. Usually cheaper above ~£30k profit.

Liability: sole trader

You are the business. Debts, contracts, legal issues — all personal.

Liability: limited company

Separate legal entity. Shields your personal assets from most business risks.

Admin: sole trader

Self assessment once a year. Basic bookkeeping. Simple.

Admin: limited company

Annual accounts + corporation tax + confirmation statement + director payroll. More admin but better optimised.

Sound familiar?

Most businesses don't have an accountant.
They have a filing service.

If any of these ring true, you're not getting what you should be.

01

You only hear from them at year-end

No check-ins, no planning, no conversation. Just a bill and a set of accounts you don't fully understand.

02

You're never sure where you stand

Your numbers are months out of date. You're making decisions based on gut feel, not real figures.

03

Surprise invoices keep landing

An email here, a phone call there — and suddenly your bill is twice what you expected. No one told you.

Common questions

Things people ask us.

At what profit level does it make sense to go limited?

As a very rough rule, once you're making more than £30-40k profit per year, limited company becomes more tax-efficient — but the exact number depends on whether you need to draw all the profit out, whether your spouse can be a shareholder, and a few other variables. We run both scenarios with your actual numbers before you decide.

Can I switch from sole trader to limited company later?

Yes, easily. We handle the transition for most clients — Companies House registration, HMRC registrations, Xero migration, and the handover of any outstanding tax. The process takes 1-2 weeks.

Does limited company protect me legally?

For most debts and contracts, yes — your personal assets are separate from the business. There are exceptions: personal guarantees (banks often ask for them), director negligence, and fraud. But for standard commercial risks, the limited company shield is real and valuable.

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