OnlyFans Sole Trader vs Ltd Company: Which Should You Choose?

One of the most common questions UK creators ask once they start earning seriously is whether to stay as a sole trader or set up a limited company. Both are legitimate ways to run your business, and neither is automatically better. The right choice depends on your income level, your appetite for admin, and how much you value privacy.

Important note: This article is for general information only. It is not financial advice. Speak to a qualified accountant before making any decisions about your business structure.

What is a sole trader?

Being a sole trader is the simplest way to be self-employed in the UK. You register with HMRC, file a Self Assessment tax return each year, and pay Income Tax and National Insurance on your profits.

There is no legal separation between you and your business. You own everything, you are responsible for everything, and all the profit is yours.

Most creators start here, and many stay here for their entire career. It is quick to set up, cheap to run, and has minimal paperwork.

What is a limited company?

A limited company (Ltd) is a separate legal entity. You register it with Companies House, and the company becomes its own “person” in the eyes of the law. You are a director of the company, and usually the sole shareholder as well.

The company earns the income, pays Corporation Tax on its profits, and then you take money out of the company as a combination of salary and dividends. This two-step process is where the potential tax savings come from, but it also brings more complexity.

How they compare on tax

This is usually the deciding factor, so let us break it down.

Sole trader tax

As a sole trader, you pay:

• Income Tax on your profits (after deducting allowable expenses). The rates for 2025/26 are: 20% basic rate (£12,571 to £50,270), 40% higher rate (£50,271 to £125,140), and 45% additional rate (above £125,140).
• Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above £50,270.
• Class 2 National Insurance at a flat weekly rate if profits exceed £12,570.

The combined effective rate on profits in the basic rate band is roughly 26%, rising to 42% once you enter the higher rate band.

Ltd company tax

With a Ltd company, the tax picture is different:

• The company pays Corporation Tax on its profits. For small companies with profits under £50,000, the effective rate is 19%. For profits between £50,000 and £250,000, the marginal rate is 26.5%. Above £250,000, the main rate is 25%.
• You pay yourself a salary, which is a deductible expense for the company. Most directors set this at or near the Personal Allowance (£12,570) to avoid paying Income Tax and significant NI on it.
• You take additional income as dividends, which are taxed at lower rates than employment income: 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). The first £500 of dividends each year is covered by the dividend allowance.

The combined effect is that at higher income levels, the Ltd route can result in a lower overall tax bill. But the gap is not as dramatic as some people suggest, and it narrows when you factor in the extra costs of running a company.

Use our tax calculator to model both scenarios with your actual numbers.

Pros and cons of staying sole trader

Advantages:

• Simple to set up. You register online with HMRC in about 15 minutes.
• Minimal ongoing admin. One Self Assessment tax return per year.
• Low running costs. No Companies House fees, no requirement for a separate business bank account (though it is strongly recommended), and lower accountancy fees.
• Your financial information is private. Sole trader accounts are not published anywhere.

Disadvantages:

• Higher tax rates at higher income levels compared to the Ltd route.
• Unlimited personal liability, meaning your personal assets are theoretically at risk if the business incurs debts.
• Can look less “established” to some business partners, though this rarely matters in the creator space.

Pros and cons of going Ltd

Advantages:

• Potential tax savings at higher profit levels through the salary plus dividends strategy.
• Limited liability. The company’s debts are separate from your personal assets (in most circumstances).
• Can look more professional for certain business dealings.
• More flexibility in how and when you take income from the business.

Disadvantages:

• More admin. You need to file annual accounts and a confirmation statement with Companies House, submit a Corporation Tax return, and run payroll for your salary.
• Higher running costs. Accountancy fees for a Ltd company are typically £1,000 to £2,500 per year, compared to £200 to £500 for sole trader Self Assessment.
• Public record. Your company name, registered office address, and filed accounts are visible to anyone on the Companies House website. For creators who value anonymity, this is a significant consideration. You can use a registered office service to keep your home address private, but your name as director will still be on public record.
• You cannot simply take money out whenever you want. There are rules about how and when you can pay dividends, and taking money incorrectly can create legal and tax problems.

The privacy question

This deserves its own section because it matters more to creators than to most business owners.

When you register a Ltd company, certain information becomes public:

• Your name (as director)
• The registered office address
• Your date of birth (month and year, not the full date)
• The company’s annual accounts (abbreviated accounts for small companies, but still visible)

If keeping your real name completely separate from your creator work is important, a Ltd company creates a paper trail that a sole trader structure does not. There are ways to mitigate this, such as using a different company name, a registered agent address, and filing the minimum required information, but it cannot be made entirely invisible.

Discuss this with your accountant before incorporating. They can walk you through exactly what will be public.

When does switching make sense?

There is no single income threshold where a Ltd company automatically becomes the better choice. The crossover point depends on your expenses, whether you have other income, your personal tax situation, and how much value you place on the extra admin.

That said, as a very general guide, most accountants suggest that the conversation becomes worth having once your annual profits are consistently above a certain level. The exact number varies, which is why personalised advice matters.

Factors that might point towards incorporating include:

• Your profits have been consistently growing over several months.
• You are paying higher-rate Income Tax as a sole trader.
• You want to retain some profits in the company rather than withdrawing everything.
• You are comfortable with the extra paperwork, or willing to pay an accountant to handle it.

Factors that might point towards staying sole trader:

• Your income is variable or you are still growing.
• You want to keep things as simple as possible.
• Privacy is a high priority and you do not want a Companies House listing.
• The tax saving would be modest after factoring in additional accountancy costs.

You do not have to decide right now

The beauty of starting as a sole trader is that you can always incorporate later. You are not locked in. Many successful creators run as sole traders for years before switching, and some never switch at all.

The important thing is to understand your options, get proper advice when the time comes, and make the choice that fits your situation rather than following generic advice from the internet.

If you want to explore how different income levels affect your tax under each structure, try our tax calculator. And if you are looking for support with the business side of things while you focus on creating, take a look at how we work. You keep your own account and your own earnings. We invoice monthly for the agreed split, and there is no lock-in.

This article is for general information only and is not financial advice. Tax rules and rates can change. Always speak to a qualified accountant about your specific circumstances.