Launching a new business in Crawley is an incredible journey. You’ve got the idea, the drive, and the ambition. But right at the start, you face one of the most fundamental (and often confusing) decisions you’ll make: how should you structure your business?

Should you keep it simple as a sole trader, or is it time to set up a limited company?

This isn’t just a paper-pushing exercise. The choice has significant, long-term consequences for your personal liability, the amount of tax you pay, and how your business is perceived. At Curve Accountancy, this is one of the first strategic conversations we have with new business owners.

This tax-focused guide will walk you through the pros and cons of each structure in plain English, helping you make the right choice for your West Sussex business.

The Core Difference: You vs. The Business

Before we get into tax, let’s be clear on the single biggest difference between the two structures.

As a sole trader, you are the business. There is no legal distinction between your personal and business finances, which means you have unlimited liability; if the business runs into debt, your personal assets (like your home or car) could be at risk. This involves registering with HMRC for Self Assessment, and the administration is typically simpler.

As a limited company, the business is a separate legal ‘person’, registered at Companies House. This creates a protective wall of limited liability, meaning your personal assets are generally safe if the business fails. This structure is often seen as more professional, but it comes with more complex statutory obligations, such as filing annual accounts and a confirmation statement.

How You're Taxed: A Tale of Two Systems

This is where the decision gets interesting. The way you pay tax is fundamentally different in each structure, which can lead to significant savings as your profits grow.

As a Sole Trader

The tax system for a sole trader is straightforward. All the profits your business makes (after expenses) are treated as your personal income for that tax year.

You pay:

• Income Tax on all profits above your Personal Allowance (£12,570 for 2025/26). The rates are 20% (basic), 40% (higher), and 45% (additional) depending on the band your profits fall into. Note that for earners over £100,000, this Personal Allowance is gradually reduced.
• Class 4 National Insurance. As of April 2024, Class 2 NICs have been abolished. For the 2025/26 tax year, you pay Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% on profits above that.

It’s simple to understand but can become expensive as your profits push you into the higher-rate (40%) tax bracket.

As a Limited Company Director

Here, the process has two steps, which gives you more flexibility:

Step 1: The Company Pays Tax Your company makes a profit. It then pays Corporation Tax on that profit. For 2025/26, the rate is 19% on profits up to £50,000 and 25% on profits over £250,000, with a tapering 'marginal relief' in between.

Step 2: You Pay Tax on What You Take Out You then decide how to pay yourself from the remaining company profits. The two most common methods are:

• Salary: You can pay yourself a small salary through a PAYE payroll system. This salary is an allowable business expense, which reduces your company’s Corporation Tax bill. However, you will pay Income Tax and National Insurance on it personally.
• Dividends: You can pay yourself dividends out of the company’s post-tax profits. You don't pay National Insurance on dividends, and the Dividend Tax rates are lower than Income Tax rates. For 2025/26, after a small £500 tax-free allowance, the rates are 8.75% (basic rate taxpayers), 33.75% (higher rate), and 39.35% (additional rate).

This salary-and-dividend combination is the key to the tax efficiency of a limited company.

So, When Should a Crawley Business Go Limited?

While starting as a sole trader is often the simplest path, there are several clear trigger points where incorporating as a limited company becomes a smart strategic move.

Trigger 1: Your Profits Are Growing This is the big one. As a general rule of thumb, once your annual profits start to consistently exceed around £30,000 to £40,000, the tax efficiency of a limited company structure often becomes significant. The exact break-even point varies depending on your personal circumstances, but this is the range where the conversation becomes crucial, as you start to feel the pinch of higher-rate Income Tax.

Trigger 2: You Want to Protect Your Personal Assets Are you about to sign a lease for a retail unit in the County Mall? Taking out a significant business loan to buy equipment? Working in an industry where legal disputes are a risk? If the answer is yes, the "limited liability" protection that a company offers is invaluable. It separates your business debts from your family home.

Trigger 3: You Need to Appear More Professional Rightly or wrongly, a "Ltd" at the end of your name carries weight. Some larger corporate clients, especially around the Gatwick Diamond area, have policies that only allow them to engage with limited companies, not sole traders. Incorporating can open doors to bigger contracts.

Trigger 4: You Plan to Reinvest Profits for Growth A limited company allows you to leave profits in the business bank account to fund future growth—perhaps for a new van, a major marketing campaign, or to build a cash reserve. You only pay personal tax on the money you take out, so the money left in the company has only been subject to Corporation Tax, allowing you to grow your business funds more quickly.

Making the Right Choice for Your West Sussex Business

There is no single "best" answer. The right structure depends entirely on your personal circumstances, your industry, your profit levels, and your ambitions.

• Sole Trader is often perfect for those starting out with lower profits, who want maximum simplicity and minimal admin.
• Limited Company is generally the better choice for businesses with growing profits, those who need legal protection, or anyone with ambitions to scale and build a valuable asset.

The good news is that you can start as a sole trader and incorporate later as your business grows. The key is to get advice at the right time.

Ready to structure your business for success? Get in touch for a friendly, no-obligation chat today.