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FreelancerCalc

Take-Home Pay Calculator

Should you operate as a sole trader or set up a limited company? Enter your expected revenue and expenses to see exactly how much you'll take home under each structure — with a full tax breakdown.

Tax year 2025/26· Updated with current HMRC rates

Your details

Enter your expected annual figures. Results update instantly.

Total income before any deductions

£

Allowable costs (software, equipment, travel, etc.)

£

% of profit contributed to pension

%

Sole Trader

£36,389

19.1% effective tax rate

£3,032/month

Limited Company

£35,811

20.4% effective tax rate

£2,984/month

A sole trader structure saves you £577/year (£48/month) at this income level.

Sole Trader Breakdown

Better option
Annual revenue£50,000
Business expenses−£5,000
Taxable profit£45,000
Income tax−£6,486
Class 4 NICs−£1,946
Class 2 NICs−£179
Take-home pay£36,389

Limited Company Breakdown

Annual revenue£50,000
Business expenses−£5,000
Gross profit£45,000
Director salary−£12,570
Employer NICs−£1,045
Corporation tax−£5,963
Dividends available£25,422
Dividend tax−£2,181
Income tax on salary-£0
Employee NICs on salary-£0
Take-home pay£35,811

How this works

  • Based on HMRC 2025/26 tax rates, NIC thresholds, and corporation tax rates.
  • Sole trader: income tax + Class 2 & 4 NICs on taxable profits.
  • Limited company: optimal salary at £12,570 (personal allowance), remainder as dividends. No employment allowance (single-director company).
  • Does not account for: flat rate VAT scheme benefits, R&D tax credits, multiple income sources, or Scottish income tax rates.
  • Always consult a qualified accountant for advice specific to your situation.

Sole Trader vs Limited Company: Which is better?

One of the most common questions for UK freelancers is whether to operate as a sole trader or incorporate as a limited company. The answer depends primarily on your income level, but there are other factors to consider.

When sole trader makes sense

If your taxable profits are below around £30,000-35,000, the administrative overhead of a limited company (annual accounts, Corporation Tax returns, Companies House filings) usually outweighs the tax savings. Sole trader is simpler: you just file a Self Assessment tax return each year.

When a limited company saves money

Above roughly £35,000-40,000 in profit, the combination of corporation tax (19-25%) plus dividend tax is typically less than income tax plus Class 4 NICs. The savings increase significantly above £50,000. At £80,000 profit, you could save several thousand pounds per year with a limited company.

Other factors to consider

  • Limited companies offer personal liability protection
  • Some clients (especially in contracting) require you to have a limited company
  • Accounting fees are higher for limited companies (typically £100-200/month vs £20-50)
  • IR35 rules may mean you're taxed as an employee regardless of structure
  • Limited companies can retain profits in the business for future use

This information is for guidance only. Tax rules change regularly and individual circumstances vary. Always consult a qualified accountant before making decisions about your business structure.