Sole trader vs limited company: the actual decision framework (not the oversimplified version)

Sole trader or limited company. It is one of the first decisions new freelancers face, and most people get it wrong — not because they pick the wrong structure, but because they pick it for the wrong reasons. The default answer (and why it is incomplete) Most accountants say: start as a sole trader, incorporate when you hit the higher rate tax band. That is reasonable advice. But it misses some nuances worth knowing. Sole trader: what you actually get Simple. Register with HMRC, file a Self Assessment return, done. No Companies House filings, no corporation tax return, no director responsibilities. Profits taxed as income — National Insurance on top. Unlimited liability. Your personal assets are on the line if things go wrong. Bank accounts, contracts, everything in your own name. Works well if: you are testing a business idea, you earn under £50k, your work carries minimal liability risk. Limited company: what changes Separate legal entity. The company owns the contracts, the bank acc