Should I go limited?” is the most common question we get from successful online sellers. The honest answer: it depends on your numbers, your goals, and your appetite for paperwork. Here is exactly when switching from sole trader to a limited company makes sense for UK online sellers in 2026.
What is the difference?
A sole trader is you, trading under your own name (or a business name you choose). You and the business are legally the same person. Profits are taxed as personal income.
A limited company is a separate legal entity registered with Companies House. The company makes profit, pays corporation tax, and you pay yourself either through salary, dividends, or both. Your personal liability is limited to what you put into the company.
The tax position in 2026
As a sole trader, you pay income tax (20% / 40% / 45%) plus Class 4 National Insurance on profits over the personal allowance. At the basic rate, total marginal tax is around 28%. At higher rate, it is 42%.
A limited company pays corporation tax at 19% on profits up to £50k, a marginal rate between £50k and £250k, and 25% above £250k. You then extract money via dividends or salary.
When does limited company make financial sense?
As a rough rule of thumb in 2026:
- Profits under £30k: usually sole trader is simpler and cheaper
- Profits £30k to £50k: possible benefit, depends on your situation
- Profits over £50k: limited company usually wins on tax
- Profits over £100k: limited company almost always wins
“Profits” here means net trading profit before any tax, not turnover. An Amazon seller turning over £200k with £40k of profit is a different proposition to a Vinted reseller turning over £200k with £80k of profit.
Reasons to go limited beyond tax
Tax is not the only reason. Other factors that push sellers towards limited:
- Limited liability protection (personal assets protected if business is sued)
- More credibility with suppliers, especially for higher-value B2B deals
- Easier to bring in business partners or investors
- Cleaner separation of business and personal finances
- Business name protection through Companies House
- Do not have to participate in Making Tax Digital for Income Tax
Reasons to stay sole trader
Going limited has costs and complexities that sometimes outweigh tax savings:
- Annual accounts and corporation tax returns are more complex
- Companies House filing requirements (statutory accounts, confirmation statements)
- Public visibility (your accounts are on public record)
- Director responsibilities and potential personal liability under company law
- Higher accounting costs
Common mistakes when switching
- Forgetting that VAT registration moves with the business (you may need to re-register)
- Not transferring stock and equipment correctly (this can trigger CGT)
- Trying to extract company funds without setting up proper salary and dividend processes
- Mixing personal and company money once incorporated
What about Amazon, Etsy, eBay accounts?
When you incorporate, you typically need to update your seller accounts on each platform with your new company details. Some platforms handle this smoothly. Others (Amazon notoriously) can put your account on temporary hold while they verify the new entity. Amazon FBA sellers should plan for this and not switch right before peak season.
Your customer reviews, seller history, and ratings transfer because the underlying account is the same, just with updated business details.
What about VAT?
If your sole trader business is VAT registered, that registration belongs to you personally, not the company. When you incorporate, you usually:
- Apply for a new company VAT number, OR
- Transfer your VAT number to the company (Form VAT68)
Transferring is usually smoother, especially for established businesses with VAT history.
Same decision, different niches
This sole trader vs limited company decision is the same calculation we run for online coaches and influencers. The numbers and considerations are largely the same, just with niche-specific quirks.
When to talk to an accountant
The “should I go limited?” decision should always involve an accountant looking at your specific numbers. We can model the tax position both ways, factor in your personal circumstances (other income, family situation, future plans), and recommend with confidence.
At Simplr Accounting, we run this analysis for online sellers regularly. If you are weighing up the switch, book a free discovery call and we will run the numbers for your business.