Creators who start earning from sponsorships, platform payouts or products soon face a practical question: should they trade as themselves or set up a company? This guide sets out what GOV.UK says about the two most common structures in the United Kingdom, where they differ and what stays the same. Everything here describes UK rules; other countries organise business structures differently.
What choices does GOV.UK describe?
GOV.UK’s guide to setting up a business says that most businesses register as a sole trader or a limited company, though there are other ways to set up, including a business partnership, a social enterprise and an unincorporated association. It says the structure chosen “can affect the way you pay tax and your legal responsibilities”, and that a business can move from one structure to another. According to the guide, it is usually easier to move from being a sole trader to a limited company than the other way round.
That last point matters for creators whose income is small or uncertain. The guidance does not say that one structure is better. It describes the differences and leaves the decision to the person running the business. Our own reading is that starting simply and changing later is a legitimate path, because the official guide treats it as normal.
How does a sole trader operate?
A sole trader runs a business as an individual. GOV.UK says a person can start trading without registering anything first, but must register for Self Assessment if they earn more than £1,000 in a tax year. The same page says a person can register earlier than that. The tax year, as the page describes it, runs from 6 April to 5 April.
Two other duties come with this status:
- Records. GOV.UK says that when someone starts trading, they must keep records. These help work out profit or loss for the Self Assessment tax return.
- Returns. After registering, a sole trader must submit Self Assessment tax returns, and HM Revenue and Customs (HMRC) then works out whether Income Tax is due.
Our guide to UK tax for creators covers what HMRC says about income from online content, including how different types of earnings are treated.
What does a limited company involve?
A limited company is a separate legal entity. GOV.UK’s formation guide says it must be registered with Companies House before it starts trading, although it can be left dormant. Registration needs a registered office address and a SIC code describing what the company does, along with constitutional documents such as the articles of association.
The guide also sets out who must be involved:
- A director. The company must appoint at least one. It does not have to appoint a company secretary.
- A shareholder or guarantor. A company limited by shares needs at least one shareholder, who can also be a director. One limited by guarantee needs at least one guarantor.
- Persons with significant control. According to the page, anyone with more than 25% of the shares or voting rights is a person with significant control, and these must be confirmed at registration.
Directors are responsible for keeping company and accounting records, filing accounts and tax returns, and checking the confirmation statement, the annual check that Companies House information is correct. GOV.UK says directors can hire others, such as an accountant, but “they’re still legally responsible for the company’s records, accounts and performance.”
How do liability and tax compare?
GOV.UK’s comparison of the two structures can be summarised in a table. Entries come from the set-up guide, the sole trader page and the formation page, as read on 17 October 2026.
| Area | Sole trader | Limited company |
|---|---|---|
| Legal liability | “Unlimited liability”: the owner is personally responsible for all of the debts of the business | Owners are responsible for the company’s debts only up to the value of their financial investment |
| Main tax | Income Tax on profits through Self Assessment; no Corporation Tax | Corporation Tax on the company’s profits; directors may also pay Income Tax and National Insurance depending on how they take money out |
| Registration | Can start trading without registering, but must register for Self Assessment above £1,000 earned in a tax year | Must register the company before trading |
| Paperwork | Records and Self Assessment returns | Company records, accounts, tax returns and a confirmation statement |
The liability row is the starkest difference. For a creator, debts could include unpaid supplier bills or money owed after a dispute. The guidance does not describe particular scenarios, so the table should be read as a general statement of principle rather than a prediction for any one business.
What are the Corporation Tax rates?
Because a company pays Corporation Tax on its profits, the rates are worth knowing. GOV.UK’s Corporation Tax rates page, as of 17 October 2026, lists a main rate of 25% and a small profits rate of 19%. Companies with profits of £50,000 or less pay the small profits rate, and companies with profits over £250,000 pay the main rate. Profits between £50,000 and £250,000 may qualify for Marginal Relief. The page adds that the £50,000 and £250,000 limits are proportionately reduced for short accounting periods and by the number of associated companies.
Worked example: a company with modest profits
Illustrative arithmetic only: a company with taxable profits of £40,000 falls below the £50,000 limit, so the small profits rate of 19% applies. £40,000 × 0.19 = £7,600 of Corporation Tax. A company with profits of £300,000 is above £250,000, so the main rate of 25% applies: £300,000 × 0.25 = £75,000. Profits in between need a Marginal Relief calculation that is not shown here.
This example covers only company-level Corporation Tax. It does not include what the owner pays personally when taking money out, such as Income Tax or National Insurance, and it ignores allowable costs and reliefs. The same business run as a sole trader would be taxed under a different system altogether, so the two figures cannot be compared directly.
When does VAT come into it?
VAT applies to both structures in the same way. GOV.UK says a business must register if its taxable turnover for the last 12 months goes over £90,000, or if it expects taxable turnover to go over £90,000 in the next 30 days. A business over the threshold must register within 30 days of the end of the month in which it went over, according to the registration page. A business under £90,000 can still register voluntarily, and the sole trader page notes that registering early can allow VAT on business expenses to be reclaimed.
Turnover is measured against the business, not the person. A creator with several income streams should look at how the guidance defines taxable turnover. The registration pages give the threshold and deadlines but not a list of creator income types, so the position for particular payments is a question for HMRC or an adviser.
Does the choice change how creators deal with brands?
Not in terms of what a brand agreement says, but it affects who signs. A sole trader contracts as an individual, which means the individual carries the contract’s obligations. A company signs in its own name. Our explainer on creator contracts lists clauses to understand before signing, including payment and exclusivity terms, and those apply under either structure.
Invoices are another place the structure shows. GOV.UK’s invoicing guidance, covered in our article on invoices and late payment, asks sole traders to include their name and any business name, while limited companies must show the full company name as it appears on the certificate of incorporation. How the money reaches the creator also varies, and our guide to how creators make money sets out the main income streams that end up in either structure.
What can the official guidance not decide?
GOV.UK’s pages explain the mechanics, but they do not say which structure suits a given creator. The formation page gives no filing deadlines for accounts or returns; it points to separate guidance for those. The sole trader page gives no Self Assessment registration or filing dates either. Anyone planning a switch should check the linked pages on running a limited company and preparing accounts, since deadlines and rates are updated from time to time.
Questions such as how to take money out of a company, how profit is taxed personally, or whether a partnership would fit better are beyond these pages. GOV.UK’s guide points to separate pages on partnerships and on getting help with tax, and professional advice is the usual route for the decision itself.
Choosing a structure: what the guidance leaves open
The official picture is simple to state. A sole trader has less paperwork and personal liability for the business’s debts; a limited company is a separate entity with owners’ liability limited to their investment, more formal duties and its own tax. Both must follow VAT rules once turnover passes £90,000, and either can be changed later. The pages do not weigh these against a creator’s income, risks or plans, which is why the choice remains a personal one made with the facts of each business.
This article is general information based on published GOV.UK guidance. It is not legal, tax or financial advice; rules, rates and thresholds change, so check the current pages or take qualified advice.
Sources: GOV.UK (Set up a business); GOV.UK (Set up as a sole trader); GOV.UK (Set up a limited company); GOV.UK (Corporation Tax rates); GOV.UK (Register for VAT: when to register); GOV.UK (Register for VAT)
