Sooner or later someone tells you you’re “mad not to be limited”. Usually it’s a mate on site; occasionally it’s an accountant who has looked at your figures, and the two carry very different weight. Meanwhile there’s a van to load and three quotes to get out, so the decision gets kicked down the road another year.

It’s worth twenty minutes, because the structure you trade under affects what happens when a job goes badly wrong, how much paperwork lands on your kitchen table, and which clients will put you on their books. Here’s the half of the decision you can judge yourself.

General guidance, not financial, tax or legal advice. The tax treatment of each structure, and the figures involved, change and depend on your own circumstances — check gov.uk and speak to a qualified accountant before you decide.

The plain difference

As a sole trader, you are the business. You register as self-employed with HMRC, trade under your own name or a trading name, and the work, the money and the liabilities are all yours. The money in the account is your money — you move it about as you like and account for it once a year.

A limited company is a separate legal thing that you own and run. You register it at Companies House and from then on the company takes the contracts, invoices the customer and holds the bank account. You’re a director and shareholder — but that cash is the company’s, not yours, and you take it out through deliberate routes (salary, dividends, repaying money you’ve put in) rather than by tapping your card.

That last point catches people out: plenty of newly-limited trades carry on treating the account as a personal pot, then face a bill on money they’d already spent.

Liability: what it means on a job

This is the headline reason people give for going limited. It’s real, and it’s widely oversold.

If a sole trader ends up owing money they can’t pay — a dispute over a botched installation, a supplier bill after a customer never paid, a claim above what your insurance covers — that debt is personally yours. Your savings and home are in scope.

With a company, the company owes it and your exposure is generally limited to what you’ve put in. Generally. The limit has real holes:

Personal guarantees. Van finance, a trade credit account, a unit lease — the lender or supplier will often want you to guarantee it personally. Sign that and you’ve handed the protection back for that debt.
Your own negligence and your duties as a director. Limited liability doesn’t put a wall between you and your own conduct, and it won’t shelter a director who keeps running up debts the company plainly can’t pay.
Some unpaid company taxes can, in certain circumstances, be pursued personally.

More to the point: a company is no substitute for insurance. The thing that pays out when you put a foot through a ceiling or flood the flat below is public liability cover, plus professional indemnity if you specify or design. Get the cover right first; the company is a second line of defence for the business’s own debts, not the first.

The admin burden, honestly

Neither option is admin-free, but the gap matters and most trades underestimate it.

	Sole trader	Limited company
Setting up	Register as self-employed with HMRC	Incorporate at Companies House, then register the company for its own taxes
Yearly filing	A Self Assessment return	Company accounts, a company tax return and a confirmation statement — plus your own personal return
Paying yourself	Draw money as you need it	Payroll and/or dividends, documented properly
Public record	Your affairs stay private	Company name, directors and accounts published on Companies House
Accountant	Many manage without one	Realistically you want one, and it costs more than a sole trader return
Paperwork	Your name or trading name	Must show the company name, and the number where required

Two practical notes. Companies House is public — a competitor or an awkward customer can look up your filings, and if you use your home address as the registered office, that address is published too. A registered office service or your accountant’s address avoids it.

And the admin doesn’t halve because you’re small: a one-van company files broadly what a ten-van one files. That’s the real cost of going limited early — not the fees, but a fixed lump of deadlines that doesn’t scale down.

How customers and bigger clients see it

Domestic customers mostly don’t care. A householder choosing between two kitchen fitters is looking at your reviews, whether you turned up when you said you would, and whether your quote looks like a professional document. “Ltd” after your name doesn’t win that job.

Further up the chain it’s different:

Main contractors and larger builders often prefer or insist on limited subcontractors, and will credit-check you before adding you to their books.
Housing associations, councils and commercial clients routinely ask for a company number on supplier forms, alongside insurance certificates.

So if the work you want next sits with those clients, structure can be the thing keeping you off the tender list. If you’re fitting bathrooms for homeowners found through word of mouth, it almost certainly isn’t.

When trades actually consider switching

There’s no magic turnover figure, and anyone who gives you one doesn’t know your numbers. The moments that genuinely prompt the question:

You’re consistently making more profit than you need to draw out. This is where the tax comparison can start to favour a company — and it’s exactly the question for an accountant with your real figures, not a forum.
You’re about to register for VAT, or just have. You’re already in the accountant’s office and already changing how you bill. (That’s a bigger practical change than incorporating — see how VAT changes your quotes.)
Your risk has grown — taking on employees or regular subbies, running several jobs at once, or moving up to higher-value work.
You’re chasing work that requires a company, per the list above.
You want to bring someone in. Shares split ownership far more tidily than an informal handshake.

Equally, good reasons to stay put: your profit is roughly what you need to live on, nobody’s asking you for a company number, and you’d rather not own another set of deadlines.

Questions for the accountant

Don’t walk in and ask “should I go limited?”. Ask these:

On last year’s actual figures, what would I have kept under each structure, after your fees?
And what if I’d had to draw everything out?
How much more will you charge a year, and what do I still have to do myself?
I’m a CIS subcontractor — how do deductions work for a company, and how do I reclaim them?

If they can’t answer the first two with numbers, find an accountant who deals with trades.

If you do switch, the loose ends

Incorporating takes an afternoon. These are what cause the problems:

Tell your insurers. A policy in your personal name doesn’t cover a company. This gets missed, and it’s the expensive one.
Put the company name and number on your quotes, invoices, website and terms — those terms are now between the customer and the company.
Re-paper your CIS position with every contractor you sub for, so deductions land against the company rather than your personal record.
Draw a clean line on a date and move whole jobs — don’t invoice half a job from one entity and half from the other. Expect suppliers to put you back on proforma for a while, too; a new company has no credit history.

The takeaway

Sole trader is simpler, private and cheaper to run, and it’s the right answer for a great many working trades. A limited company gives you some separation from the business’s debts, opens doors with contractors and commercial clients, and can be more efficient once you’re making more than you take out — at the price of real, non-negotiable admin.

Neither fixes pricing, mind. A limited company that undercharges still goes under, just with more paperwork — the sums behind what you need to earn per day are identical either way.

So judge what you can judge: whether the clients you want next need you to be a company, and whether you’ll live with the filing. Hand your real figures to an accountant for the tax half, and take the registration steps from gov.uk rather than anyone’s memory — including mine.

Queezy builds your quotes on site and sends them as a branded, itemised A4 PDF, with your business name, terms and VAT shown properly — whichever way you trade. Download it free on iPhone.

Sole Trader or Limited Company? A Guide for Trades