Sole Trader vs Limited Company — Business Structure
Sole trader vs limited company: the tax difference explained
Spoke 1 — the two systems side by side.
**Sole trader:** Income Tax 20/40/45% above £12,570 personal allowance + Class 4 NI 6% (Class 2 abolished). Taxed on **all profit**, whether drawn or not. **Limited company:** Corporation Tax 19% up to £50k, marginal relief to £250k (~26.5% effective), 25% above. Then dividend tax 10.75/35.75/39.35% on extraction above £500. Key conceptual difference: sole trader is taxed on **profit**; company director is taxed on **extraction**. That timing flexibility is the company's structural advantage. **Read the full guide at [rraccountants.uk/sole-trader-vs-limited-company-tax-difference](https://rraccountants.uk/sole-trader-vs-limited-company-tax-difference).**
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