Sole Trader vs Limited Company in 2025

[vanman1936]

Hi all

I recently started to be self employed again and am looking at the tax benefits of the two primary ways to trade.

When I was last self employed it made sense to use a limited company from a tax perspective. These days however, being self employed (vs via limited company) seems to be more tax efficient as you pass £60k with material diferences coming in the more you earn.

https://www.experlu.co.uk/calculator/company-vs-so...

Am i missing anything here from a tax perspective? Am aware of the other pros and cons of each approach e.g. liability, book keeping, companies house etc.

Thanks in advance!

[Eric Mc]

No real tax incentive these days. HOWEVER, Making Tax Digital (MTD) for Income Tax is being introduced for Sole Traders (and landlords in April 2026 i.e. the need to submit quarterly figures to HMRC using proprietory approved software. This is a major imposition for smaller sole traders in my view and will utterly change the way sole traders need tio conduct their business record keeping.

At the moment, there is no timetable for when limited companies need to switch to MTD for Corporation Tax (although I am sure it will come in for limited companies eventually).

For that reason alone, I think setting up your business to operate through a limited company might be one way of avoiding the hassle of MTD - for a few years at least.

[vanman1936]

Thanks Eric, wasnt aware of that.

I was really suprised to see that say if you earned £200k, its a £10k tax saving to remaining a sole trader. Quite odd, given HMG should be encoraging small business growth (and a limited company gives you the protection you need).

[Eric Mc]

It's called disjointed thinking combined with overly complicated tax and NI rules which produce unintended consequences.

[2fa]

Does making tax digital affect only commercial property landlords, or only residential btl landlords, or both?

Can't wait, lol.

[Eric Mc]

2fa said:

Does making tax digital affect only commercial property landlords, or only residential btl landlords, or both?

Can't wait, lol.

Both.

Any rental income (if it exceeds £50,000 Gross for 2026/27 or £30,000 Gross from 2027/28).

[2fa]

Eric Mc said:

2fa said:

Does making tax digital affect only commercial property landlords, or only residential btl landlords, or both?

Can't wait, lol.

Both.

Any rental income (if it exceeds £50,000 Gross for 2026/27 or £30,000 Gross from 2027/28).