Sole Trader vs Ltd Company (Sellers)
For marketplace and ecommerce sellers, the structure decision is not the same as for a service business. Stock reinvestment means your taxable profit often exceeds your available cash, and platform fees change the income picture before the tax comparison even starts. This calculator runs the sole-trader and limited-company take-home side by side at your profit level, after you have already deducted platform fees, cost of goods and other business costs. It uses 2026/27 rates for income tax, Class 4 NIC, corporation tax and <a href="https://www.gov.uk/tax-on-dividends">dividend rates under Finance Act 2026</a>.
Net profit after deducting platform fees (referral, fulfilment), cost of goods sold and all other allowable costs. Enter the figure before any personal income tax or NIC. If you use the seller take-home calculator to model your costs, the net profit figure it shows is the one to enter here.
This is an estimate for illustration. It assumes no other income, a £5,000 salary (below the employer NIC threshold), full extraction of remaining post-tax profit as dividends, and no additional-rate income. Corporation tax marginal relief between £50,000 and £250,000 is applied. Accountancy costs for a limited company (typically £1,000 to £2,000 per year more) are not included. Speak to an accountant before changing structure.
Frequently asked questions
Should I incorporate my Shopify or Amazon selling business?
At selling profits below roughly £30,000 to £35,000, the tax saving from incorporating rarely covers the extra accountancy fees. Above that level, a limited company can produce a lower tax bill, but only if profit is retained inside the company rather than fully extracted as salary and dividends. When every pound of profit is drawn out in the same year, the combined corporation tax plus dividend tax (at 10.75% basic rate from April 2026 under Finance Act 2026 s.4) exceeds the combined income tax and Class 4 NIC a sole trader pays in the basic band, so the sole trader stays ahead at full extraction. The company wins when you reinvest retained profits or leave them inside the business. The right answer depends on your profit level after platform fees and stock costs, how much you need to draw, any other income and your plans for the business. Use this calculator as a starting point and talk to an accountant before incorporating. For the generic version of this calculation without seller-specific inputs, the generalist incorporation calculator at hollowaydavies.co.uk covers that.
Does Making Tax Digital affect my structure choice?
MTD for Income Tax applies to sole traders with combined self-employment and property income above £50,000 from 6 April 2026, above £30,000 from April 2027, and above £20,000 from April 2028. A limited company is not subject to MTD for Income Tax; it files corporation tax returns under standard CT rules. If you are approaching the MTD thresholds as a sole trader and incorporation makes tax sense at your profit level, the two benefits can align.
What is the £1,000 trading allowance and does it affect the comparison?
The £1,000 trading allowance means sellers with gross trading income of £1,000 or less may not need to register for Self Assessment or pay any tax. Above £1,000, you can either use the allowance instead of actual expenses or deduct real costs. For goods sellers with real stock costs, deducting actual COGS almost always produces a lower taxable profit. Incorporation at the £1,000 level is rarely worthwhile.