# Sole trader or limited company? How to decide (UK)

Choose sole trader for the simplest, cheapest start when profits are modest. Choose a limited company for liability protection and, usually above roughly £30,000 profit, lower tax. Most people begin as a sole trader and switch to a company later.

## Steps
1. Start from why, not just tax: Pick the structure for the reason that matters most to you right now - simplicity and speed (sole trader), or protecting your personal assets and looking more established (limited company). Tax is one input, not the whole decision.
2. Look at your real numbers: Roughly, a limited company starts to save tax once profits pass about £30,000 a year, because you can mix a small salary with dividends taxed at lower rates than Income Tax. Below that, a sole trader is usually simpler and no more expensive.
3. Weigh the admin you will actually do: A sole trader files one Self Assessment return a year. A limited company files annual accounts, a Company Tax Return and a confirmation statement, keeps its money separate, and its directors are named on a public register. Be honest about which load you want.
4. Confirm it with an accountant: This is a tax and legal decision, so run your specific numbers past a qualified accountant before you commit. They will confirm the tax-efficient choice for your situation - Corey can prepare the figures, but it does not replace them.
5. Set it up and hand over the recurring admin: Once you decide, register (HMRC for a sole trader, Companies House for a company) and hand the ongoing bookkeeping, deadlines and filing prep to Corey so the paperwork runs itself either way.

## FAQ
Q: Should I be a sole trader or a limited company?
A: If you are starting out, earning modest profits and want the least admin, a sole trader is usually the simpler, cheaper choice - you can start trading straight away. A limited company makes more sense when you want to protect your personal assets behind limited liability, look more established to clients or lenders, or your profits are high enough (roughly £30,000 a year and up) that taking a salary plus dividends saves tax. It depends on your numbers and plans, so confirm the call with a qualified accountant.

Q: Is it cheaper to be a sole trader?
A: To set up and run, usually yes. A sole trader pays nothing to register with HMRC and files one Self Assessment return a year. A limited company costs £100 to incorporate online with Companies House, then carries more ongoing admin - annual accounts, a Company Tax Return, a confirmation statement (£50 a year) and usually an accountant. On tax, though, a company can be cheaper once profits are high enough that dividends beat Income Tax, so "cheaper" depends on whether you mean admin or tax.

Q: When should I switch to a limited company?
A: There is no fixed threshold, but people commonly switch when profits reach roughly £30,000 to £40,000 a year and the tax saving from salary-plus-dividends outweighs the extra admin, or sooner if they need limited liability, want to look more established, plan to take on investment, or win clients who prefer to work with a company. Ask an accountant to model your numbers - the crossover point moves with your profit and how you pay yourself.

Q: How do I register as a sole trader or a limited company?
A: To become a sole trader you register with HMRC for Self Assessment - you must do this once you earn over £1,000 from self-employment in a tax year, and you can start trading before you register. To form a limited company you incorporate at Companies House, which costs £100 online and is usually done within 24 hours, then you register the company for Corporation Tax. A company also has to keep statutory records and file annually.

Q: Can I change from a sole trader to a limited company later?
A: Yes. Changing from a sole trader to a limited company is common and straightforward - you incorporate a new company at Companies House, move your business into it, tell HMRC, and stop filing as a sole trader. Going the other way, from company back to sole trader, is also possible but means closing the company down properly. An accountant should handle the transfer of assets and any tax points so nothing is missed.

Corey does this for you. Start with Corey, 28 days on us: https://getcorey.ai/get-started