Guides
Sole Trader vs Limited Company: The Difference
Published 10 Jun 2026 · Updated 18 Jul 2026
A sole trader is one person trading as themselves, with a single Self Assessment return to HMRC. A limited company is a separate legal entity, registered at Companies House, with its own annual accounts and Company Tax Return on the public record. Neither is automatically better. Which one suits you depends on your situation, not a rule of thumb. This page covers the real difference, what each structure has to file, and how to weigh them up if you're choosing between them.
Which one are you right now?
Plenty of people trade for months without being sure. The test is simple: you're a limited company only if you, an accountant, or a formation agent registered one at Companies House. Search the free Companies House register for your name and your business name.
- Nothing comes up? You're not a company. You're a sole trader, and your only reporting relationship is with HMRC through Self Assessment.
- A company comes up with you as a director? You have a limited company, and it has its own filing obligations — whether or not it's trading. Start with company accounts.
For the specifics — whether sole traders appear on the register at all, and why a sole trader has no company number — see Are sole traders registered at Companies House?.
What's the difference between a sole trader and a limited company?
The difference is legal, not just paperwork. A sole trader and their business are the same person in law: you own the assets, you owe the debts, and you report your trading profit as part of your personal income. A limited company is a separate legal person: it owns its assets, owes its own debts (with normal exceptions), and reports its own profits. That single distinction is what drives everything below — who you answer to, what goes on the public record, and how many returns you file.
In short:
- Sole trader — you and the business are one. One reporting relationship, with HMRC, through Self Assessment. Nothing public.
- Limited company — a separate entity registered at Companies House. It answers to two bodies (Companies House and HMRC), and its accounts sit on the public register.
What does each one have to file?
This is where the two structures really part ways. A sole trader reports to HMRC once a year. A limited company reports to two bodies, on separate clocks.
| Obligation | Sole trader | Limited company |
|---|---|---|
| Companies House registration | None — you're not on the register | Incorporated at Companies House |
| Annual accounts to Companies House | None | Yes — due 9 months after the year end (first accounts: 21 months after incorporation) |
| Confirmation statement | None | Yes — at least annually |
| Tax return | Self Assessment — online by 31 January | Company Tax Return (the CT600, plus accounts and computations) — due 12 months after the accounting period ends |
| Paying the tax | 31 January (plus 31 July where instalments apply) | Corporation Tax — due 9 months and 1 day after the period ends, before the return deadline |
| On the public record | Nothing | Your accounts and company details are published on the register |
| Your own personal return | That's the whole job | The company's CT600 doesn't cover you — as a director you may also need Self Assessment |
| Digital filing requirements | Making Tax Digital for Income Tax is phased in by income level from April 2026 | Software-only Companies House accounts filing arrives April 2028; this is not Making Tax Digital |
The pattern to remember: incorporating roughly triples the filing calendar. One annual return becomes accounts, a confirmation statement and a company tax return, each with its own deadline, plus possibly your own Self Assessment on top.
Sole trader vs limited company: which is better?
There's no universal answer, and anyone who gives you one without asking about your situation is guessing. The honest version of the trade-off:
A limited company gives you: a separate legal entity (the company's debts are the company's, with normal exceptions), a structure investors and some larger customers expect, and more flexibility in how you pay yourself.
It costs you: the fuller filing calendar above, accounts on the public register, and more admin (or accountancy fees) every year.
On tax: sometimes a company saves money, sometimes it doesn't. It depends on your profit level, what you need to take out, and what you leave in the business. Run the numbers on your own figures before deciding — a structure chosen for tax reasons on someone else's numbers is a common and expensive mistake.
Weighing up a switch specifically? Sole trader to limited company covers when incorporating makes sense and how the change works. Either way, it's a one-off decision worth getting right. See how we help →
Where to go next
- You're a sole trader: sole trader accounts covers everything that actually applies to you, and what doesn't — or start at the sole trader hub.
- You're checking the register question: are sole traders registered at Companies House? answers the company-number query directly.
- You're a limited company: start with the two pillars — company accounts (Companies House) and the company tax return (HMRC).
- You're confused about the two tax returns: Self Assessment vs company tax return untangles them.
Frequently asked questions
Is a sole trader a limited company? No — they're two different structures. A sole trader is an individual trading in their own name, with nothing registered at Companies House. A limited company is a separate legal entity that has been incorporated there. See are sole traders registered at Companies House?.
Is a sole trader a company? No — a sole trader isn't a company and isn't on the Companies House register. "Company" in a filing sense means an incorporated entity; a sole trader is an unincorporated business run by one person. More on the register question: are sole traders registered at Companies House?.
How do I check if my business is a limited company? Search the Companies House register for your name and business name. It's free and takes about two minutes. If no company is registered, you're not a limited company.
Can a sole trader use "Ltd" in their business name? No. A sole trader's name must not include "limited", "Ltd", "LLP" or "plc" — those are reserved for registered entities.
I registered a company but I trade as a sole trader. What do I file? Both. Self Assessment for your trading, and company filings for the company. Even a company that has never traded must file dormant company accounts and a confirmation statement each year.
Is a limited company always better for tax? No. It depends on your profits and how you take money out. For some people incorporation saves real money; for others the extra admin outweighs the gain. It's a calculation, not a rule of thumb.
Do I lose my business name if I stay a sole trader? Trading names aren't protected the way registered company names are. Some sole traders register a company purely to hold the name — which works, but the company then has filing obligations of its own (see the dormant accounts question above).