Tag: Limited company
Sole trader or limited company: which leaves me better off on my profit?
On tax alone, at 2026/27 rates, the old rule that a company always saves you money no longer holds. A sole trader on £30,000 profit keeps about £1,065 a year more than a one-person company paying a small salary plus dividends. At £80,000 the sole trader is still ahead, by about £1,950. The company pulls back when you leave profits in the business or pay into a pension, and it brings limited liability, which is a separate question from tax. Cited to GOV.UK, checked 20 October 2026.
How much corporation tax does my limited company pay?
It depends on profit. Up to £50,000 of profit the small profits rate is 19%. From £250,000 the main rate is 25%. Between those, the 25% rate applies with marginal relief, which works out to an effective rate that climbs from 19% towards 25%. On £100,000 of profit the bill is £22,750. Nobody sends you a bill: the company works it out, files the return and pays. Cited to GOV.UK, checked 20 October 2026.
Salary, dividends or both: how should I pay myself from my company?
For most one-person companies the answer in 2026/27 is a small salary plus dividends. A salary of £12,570 uses your tax-free Personal Allowance, and dividends above it are taxed at 10.75% in the basic band, lower than the 20% Income Tax plus 8% National Insurance on salary. On £60,000 of company profit the mix saves roughly £4,500 a year against taking it all as salary. Dividends can only come from profits after Corporation Tax. Cited to GOV.UK, checked 20 October 2026.
What are the dividend tax rates and allowance for 2026/27?
The dividend allowance is £500. Above it, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher band and 39.35% in the additional band. The basic and higher rates rose by 2 percentage points on 6 April 2026. Dividends inside an ISA are not taxed at all. Cited to GOV.UK, checked 20 October 2026.