In the UK, the choice between trading as a sole trader and running a private limited company on your own is not a choice about size — it is a choice about two things: how far your own money is exposed, and how much administration you take on. A sole trader business has "unlimited liability", meaning the owner is personally responsible for all of the debts of the business (GOV.UK). A private limited company has "limited liability": owners are responsible for business debts only up to the value of their financial investment (GOV.UK / Companies House).
Everything else in this comparison follows from that split.
Liability: your money, or the company's
As a sole trader you can start trading straight away without registering, but you must register for Self Assessment if you earn more than £1,000 in a tax year, which runs from 6 April to 5 April. When you submit your Self Assessment tax return, HM Revenue and Customs (HMRC) works out whether you need to pay Income Tax and National Insurance contributions, based on your profits.
A limited company is a separate legal person. Its debts belong to it, and your exposure is capped at what you put in. That protection is the main reason one-person companies exist, and it is also the reason the state asks for more paperwork in return.
What "a company of one" has to contain
A private limited company is not just you with a new name. GOV.UK's guidance on setting up a private limited company sets out the minimum shape:
- One director. A company must have at least one director, and a director must be 16 or over. Directors do not have to live in the UK, but the company must have a UK registered office address.
- No company secretary. A private limited company does not need one.
- At least one shareholder. A company limited by shares must have at least one shareholder, who can also be the director. If you are the only shareholder, you own 100% of the company.
- A person with significant control. A shareholder who owns more than 25% of shares or voting rights is classed as a person with significant control (PSC) — which, in a one-person company, means you.
That structure is public. Sole traders carry none of it.
Registering: nothing to file, or £100 and a code
Registering a company with Companies House online costs £100 and can be paid by debit or credit card, and the company is usually registered within 24 hours (GOV.UK / Companies House). Before registering, you may need to verify your identity using GOV.UK One Login; you then get a unique Companies House personal code to prove you have done so.
Companies House's fee table, updated 25 September 2026, lists incorporation at £100 online or by software and £124 on paper, with same-day incorporation at £156 by software (Companies House). Those are registration fees only; they are not the cost of running the company.
Tax: Self Assessment or Corporation Tax
A sole trader's profits go through Self Assessment, and HMRC works out Income Tax and National Insurance from the return. Corporation Tax is the tax a limited company pays on its profits, and here the burden shifts to you: you do not get a bill for Corporation Tax, and there are specific things you must do to work out, pay and report it (GOV.UK / HMRC). Companies usually set up Corporation Tax when they register; if not, Corporation Tax services should be added to the business tax account when the company starts doing business.
One limit on this comparison: the Corporation Tax rates themselves are not set out in the official material used here. Rates, thresholds and reliefs change, so treat the obligation as settled and the numbers as something to check with HMRC directly.
The annual filing sole traders do not have
Every company, including dormant and non-trading companies, must file a confirmation statement at least once every 12 months, up to 14 days after the review period ends. Filing online costs £50; on paper it costs £110 (Companies House). Not filing carries fines of up to £5,000 and can lead to the company being struck off.
Sole traders have no confirmation statement. Their recurring obligation is the Self Assessment tax return.
Side by side
| Sole trader (UK) | Private limited company (UK) | |
|---|---|---|
| Liability | Unlimited — personally responsible for all business debts | Limited — up to the value of your financial investment |
| Getting started | Start trading straight away; register for Self Assessment if you earn more than £1,000 in a tax year (6 April to 5 April) | Register with Companies House; £100 online, usually registered within 24 hours |
| People required | None | At least one director (16 or over) and at least one shareholder, who can be the same person |
| Registered office | No separate requirement | UK registered office address required |
| Tax on profits | Income Tax and National Insurance worked out by HMRC from your Self Assessment return | Corporation Tax on profits — no bill is sent; you work out, pay and report it |
| Recurring filings | Self Assessment tax return | Confirmation statement at least once every 12 months (£50 online, £110 on paper) |
| Annual running cost | No Companies House fee | Confirmation statement fee each year |
What this does not settle
The fees and rules above were checked against GOV.UK on 1 October 2026. Most GOV.UK guidance pages do not carry an on-page "last updated" date; the Companies House fees page is the exception, dated 25 September 2026. Corporation Tax rates are not covered here, and neither are the accounting records a company must keep, because the official material used for this page does not set them out. Liability and filing obligations are the reliable part of the comparison; the money question depends on figures you should confirm with HMRC or an accountant before you incorporate.
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