Sole trader or limited company which is best for you ?

Updated: Aug 27, 2020

Congratulation for the first step to become your own boss. There are different structure which you can chose to set up your business. I am going to concentrate on Sole Trader vs Ltd company.

Limited as the title suggest your liability is limited to your shareholding in the company. For example if someone try to sue your company your liability is limited to the amount invested in the company. Lets say you are 100 percent shareholder of Example Ltd. You have bought the shares for £100. The claimant is suing your company for £100k, you will only be liable to pay £100 from your own pocket if your company can not cover the full £100k from company reserves.

As a Sole Trader there is not much difference between you and your company. Your business debts becomes your own debts. Taking the above example of £100k sue case, if your business can not cover the debts you will have to cover the claimant amount from your own pocket this includes your assets such as your own house.

Is it not bad as it sound from the above scenario. There are certain benefits which outweigh the ltd company.

Sole Trader pays tax on business income via completing self assessment return by 31st January after the end of financial year.

There are less compliance for sole trader vs Ltd company. Ltd company year end accounts need to be filled to company house and are visual on company house website. Sole trader accounts does not show on company house and only the owner's Accountant or HMRC knows about sole traders income information, It is not publicly available.

Sole trader pays £3 a week Class 2 NIC and Class 4 NIC on profit over £8,632 (2020/21)

ltd company will have to pay employer NI (13.8% earning above £8788.00) from company prospective and also from employee NI (12% earning above £9,500).

Ltd company can deduct donation as a expenses from the income which will reduce profit and less tax to pay. However sole trader/Self employed can not deduct the donation amount from their income.

Ltd company have to file confirmation statement each year where as there is no requirement for sole trader.

ltd company is more appealing in some sector where they would not do a business with a sole trader.

The list goes on. It is better to speak to an Accountant to find out what sort of structure will be beneficial for you. Get in touch S K Punia Accountant to find out more.

Other articles which may be beneficial for you

Tax Saving for Self employed

Tax Saving ltd Company Tips

Sole Trader VS Ltd Company for start up

11 views0 comments

Recent Posts

See All

HMRC delays late payment 5% charge

The payment deadline for self assessment was 31 January 2021 and It has been extended to 28th February 2021. Interest is charged from 1 February 2021 on any tax amounts outstanding. A 5% late paymen


S K Punia Accountant



We get to know you: We will learn about your business and understand the industry it operates in, ensuring we always meet your expectations and deliver the best accountancy services support

You have one point of Contact: As other firms you will no longer first go to call centers and account mangers, at S K Punia Accountant you will have personal accountant who will be your main point of contact at all times saving you time and hassle.

We take care of numbers: You will no longer need to worry about sorting out tax bills and financial compliance for your business- from now on, We will take care of it all for you, giving you peace of mind and saving time to utilize toward your business growth.

Great Advice: We will ensure you keep as much of your earnings in the most tax efficient ways as possible in accordance with HMRC requirements.

Market Leading accounting software: We will ensure you have access to market leading accounting software such as Xero, Sage or Quickbooks and will provide you training

Weekend & Evening availability: Most of our clients have side business and also employed. We provide weekend and evening appointments saving you time and money by not taking the time off from work.

Why  Chose S K Punia Accountants?

Mobile: 07809568192

Phone:  02081273963


  • S K Punia Accountant Facebook
  • LinkedIn S K Punia Accountant
  • S K Punia Accountant YouTube
  • Twitter