Ltd vs sole trader at £60,000 profit: full tax comparison 2025/26
Summary
Updated April 2026 — Sources: GOV.UK income tax, NIC, and corporation tax rates.
At £60,000 annual profit, the sole trader vs limited company decision is one of the most common questions for UK freelancers. Here is a full numeric comparison using 2025/26 rates.
1. Sole trader — £60,000 profit
- Personal allowance: £12,570 (tax-free)
- Basic rate tax: (£50,270 − £12,570) × 20% = £7,540
- Higher rate tax: (£60,000 − £50,270) × 40% = £3,892
- Class 4 NIC: (£50,270 − £12,570) × 6% + (£60,000 − £50,270) × 2% = £2,457
- Class 2 NIC: £179
- Total tax + NIC: £14,068
- Take-home: ~£45,932
2. Limited company — £60,000 profit
Salary £12,570 (uses personal allowance, no income tax). Employer NIC: (£12,570 − £9,100) × 13.8% = £477.
- Company profit after salary + employer NIC: £60,000 − £12,570 − £477 = £46,953
- Corporation tax at 19%: £8,921
- Distributable: £38,032
- Dividend tax (after £500 allowance): ~£3,280
- Total tax + NIC: ~£12,678
- Take-home: ~£47,322
3. Verdict at £60,000
Ltd advantage: approximately £1,390 more take-home. The gap widens at higher profits. However, Ltd adds compliance costs of £1,500–£3,000/year — at £60,000 the structures are roughly equivalent after costs.
4. Sources
FAQ
Which is cheaper at £60,000 profit — sole trader or Ltd?
At £60,000, a Ltd with optimal salary (£12,570) and dividends typically yields £2,000–£4,000 more take-home than a sole trader, after accounting for corporation tax and employer NIC.
Does the Ltd advantage increase with higher profits?
Generally yes. The NIC savings on dividends become more significant as profits rise above £50,270, where sole traders face higher Class 4 and income tax rates.
What costs does a Ltd add?
Accountant fees (£1,000–£2,500/year), Companies House filing (£50/year), business bank account, and additional admin time. Factor these into your comparison.