Sole Trader v. Limited

(2 minutes to read)

There are a few different routes you can take when it comes to self-employment – here we take a look at both contracting as a sole trader and through a limited company, which may help you decide which is best for you.

What is a sole trader?

As a sole trader, you will register yourself as self-employed with HMRC, and at the end of each tax year you’ll need to report your income, expenses and tax liabilities via a self-assessment tax return

You will run your own business as an individual, which means that you are personally liable for any debts or losses made.

Responsibilities include:

  • Keeping business records and proof of expenses.
  • Filing your self-assessment tax return.

For more information on starting up, read our How to set up as a Sole Trader page.

What is a limited company?

Unlike a sole trader, a limited company is seen as its own legal entity and so is taxed separately from its directors, shareholders and employees.

This also means that owners have limited liability – should the business incur any debts or losses, then the owner’s personal assets are protected.

There will be additional taxes and obligations compared to a sole trader.

Responsibilities include:

  • Keeping company records and proof of expenses.
  • Report any changes to Companies House (such as a change of business address, directors or their personal details).
  • File your accounts and your company tax return.
  • Pay Corporation Tax.

Read our Starting up Checklist page for guidance on how to set up your own limited company.

Sole trader or limited?

There are both pros and cons to contracting as a sole trader and through a limited company, but the best route for you will all depend on your individual circumstances, as well as your expectations of how you want your business to progress.

Income will be a huge factor to consider; for example, if it’s at the lower end of the scale (typically under £25,000 per year) then it’s unlikely that a limited company would benefit you when you take administrative costs into account.

Something else to think about is whether your contracts are higher risk or put you at personal liability – if so, then having the protection of a limited company would come in handy.

If you do have plans to grow your business and want to hire staff, work with a partner or increase your future income etc., then having the structure of a limited company to begin with will also be helpful.

We hope you found this page helpful. If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email

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Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.
  • Same day payments- We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email or