Do sole traders pay Corporation Tax?
Why a sole trader never pays Corporation Tax
A sole trader and their business are legally the same person. There is no company in between, so the business profit is simply your income, and it is taxed the way personal income is taxed. A limited company is a separate legal person. It earns the profit, so it pays tax on it, and that tax is Corporation Tax.
What sole traders pay instead
Your profit, meaning income minus allowable expenses, goes on your Self Assessment return. You then pay:
- Income Tax at 20%, 40% and 45% above your £12,570 Personal Allowance (Scotland has its own bands);
- Class 4 National Insurance at 6% on profit between £12,570 and £50,270 and 2% above that;
- Class 2 National Insurance, which is now treated as paid for most people.
For a sole trader in England with £45,000 of profit in 2025-26, that is £6,486 of Income Tax plus £1,945.80 of Class 4, giving £8,431.80. The bill is due by 31 January after the tax year ends, often with payments on account on top. Our guide to how much tax you pay when self-employed has the figures at other profit levels.
Who does pay Corporation Tax
Limited companies, along with some clubs, co-operatives and other unincorporated associations. The rates for company profits are:
| Company profit | Corporation Tax |
|---|---|
| £50,000 or less | 19% (small profits rate) |
| £50,001 to £250,000 | 25%, reduced by Marginal Relief |
| Over £250,000 | 25% (main rate) |
Between £50,000 and £250,000, Marginal Relief means each extra pound of profit is effectively taxed at 26.5% until the full 25% applies. The thresholds are shared out if a company has associated companies.
Why the headline rates mislead
A 19% Corporation Tax rate looks cheaper than 20% Income Tax plus 6% National Insurance. But a company's profit belongs to the company. To get it into your own pocket you normally take dividends, which are taxed again at dividend tax rates of 10.75% and 35.75% from April 2026. Add the accountancy fees and the extra paperwork, and the gap is often much smaller than people expect. The full comparison is in sole trader vs limited company tax.
Partnerships
An ordinary partnership does not pay Corporation Tax either. Each partner pays Income Tax and Class 4 National Insurance on their share of the profit through their own Self Assessment return.
Working out what you will pay
There is no such thing as a sole trader Corporation Tax calculator, because the tax is not Corporation Tax. What you need is a Self Assessment estimate. Enter your profit in the estimator and it shows your Income Tax and National Insurance line by line, the way an SA302 sets it out.
Frequently asked questions
Do sole traders pay Corporation Tax?
No. Sole traders pay Income Tax and Class 4 National Insurance on their profit through Self Assessment. Corporation Tax is paid by limited companies and some other organisations.
What tax does a sole trader pay?
Income Tax at 20%, 40% or 45% on profit above the £12,570 Personal Allowance, plus Class 4 National Insurance at 6% and 2%. Class 2 is now treated as paid for most sole traders.
What is the Corporation Tax rate?
19% on company profits of £50,000 or less, and 25% on profits over £250,000, with Marginal Relief in between.
Is a sole trader a company?
No. A sole trader is a self-employed individual. The business and the person are legally the same, which is why the profit is taxed as personal income.
Do partnerships pay Corporation Tax?
An ordinary partnership does not. Each partner pays Income Tax and Class 4 National Insurance on their share of the profit.