Sole trader or limited company: the honest answer
Incorporating is not automatically the right move. Here is roughly where the line sits, and what people forget to count.
Ask the internet whether to incorporate and you will be told yes, immediately, by people who benefit from you doing so. The real answer depends on how much you earn, how much you need to draw, and how much administration you are willing to take on.
Where the tax argument starts to work
Below roughly £30,000 to £40,000 of profit, the tax saving from incorporating is usually small enough that the extra cost and admin cancel it out. Above that, the gap widens, particularly if you can leave profit in the company rather than drawing all of it.
That last point matters more than the headline rates. The saving comes largely from retaining profit and taking it as dividends over time. If you need every pound out of the business each year to live on, the advantage shrinks considerably.
What people forget to count
A limited company means statutory accounts, a corporation tax return, a confirmation statement, a separate business bank account, and a public record of your directorship and registered office. It usually means a self assessment return as well, so you now have two filings rather than one.
It also means real legal separation. Company money is not your money. Taking it out informally creates a director's loan, and director's loans have their own tax consequences.
The other reasons
Tax is not the only reason to incorporate, and often not the best one. Limited liability matters if you carry genuine commercial risk. Some clients and framework agreements will only contract with limited companies. And if you are ever going to sell or bring in a partner, a company is a far easier thing to sell than a sole trade.
What to do about it
Run the numbers on your actual profit and your actual drawings before deciding. If the answer is close, wait — incorporating is easy, unwinding it is not.
This article is general information, not advice for your particular circumstances. Tax rules change and the right answer depends on your situation — please speak to us before acting on anything here.