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Sole trader or company? in
What each costs you in tax, what each costs to run, and the one question that usually decides it: will you keep money in the business?
In Jersey a sole trader is taxed on all the profit as their own income; most companies pay 0% on profit, and what the owner takes out is taxed as theirs — never above 20% either way.
So the difference is profit you leave in the business. Money spent on the business — tools, materials — is an expense either way. Profit kept for later is taxed this year as a sole trader’s income; in a 0% company it is not taxed until it is paid out to you.
- 5 Before you apply · 100%
- 4 You · 80%
- 1 Done for you · 20%
£7,700 less paid this year as a company — the kept money is taxed when it is paid out.
Move along the chart to read any income.
The figures, as a table
| Income | Income tax | Social Security |
|---|---|---|
| £20,000 | £0 · 0.0% | £2,500 · 12.5% |
| £40,000 | £4,875 · 12.2% | £5,000 · 12.5% |
| £60,000 | £10,075 · 16.8% | £7,500 · 12.5% |
| £80,000 | £15,275 · 19.1% | £9,274 · 11.6% |
| £100,000 | £20,000 · 20.0% | £9,774 · 9.8% |
| £120,000 | £24,000 · 20.0% | £10,274 · 8.6% |
| £140,000 | £28,000 · 20.0% | £10,774 · 7.7% |
| £160,000 | £32,000 · 20.0% | £11,274 · 7.0% |
| £180,000 | £36,000 · 20.0% | £11,774 · 6.5% |
A single person with no other allowances: tax is the lower of 20% of income and 26% of income above £21,250.
Decide it should be a companyYou
Most start-ups in Jersey trade as a sole trader: self-employed, in your own name or a business name, and personally responsible for the business’s debts. Partners share the profit and the debts, and should have a written agreement. A limited company is a separate legal person: its finances are its own, and if something goes wrong its owners can only lose the capital they put in — in exchange for ongoing duties.
Why now: Everything after this depends on it, so it comes first.
As a sole traderYou
All the profit is your income. Tax is the lower of 20% of your income and 26% of what is above £21,250 — so it rises gradually and never passes 20%. It is paid in two instalments, in May and November, with any balance by 30 November.
As a companyYou
Most companies pay 0%. You declare what the company gives you — pay, dividends or benefits — on your own return, and a dividend from a 0% company is taxed at your rate. If it pays you a salary it registers as an employer. Since 2012 you are taxed only on what is paid out, not on profit the company keeps.
Social Security is the same either wayDone for you
An owner of their own company pays Class 2, like a sole trader — on their own income, from two years before.
What a company costs to keepYou
From £200 to incorporate, then £220 a year for the annual confirmation statement and the data protection charge from £70; its own tax return, its own books and a second person as secretary.
What you do not need
- A company, if you take out everything you earn: the tax is the same ceiling, and the company only adds its costs.
Our advice, in plain words
- If you will keep profit in the business to grow it — a van next year, a first employee — a company is worth working out properly.
- If you will take out everything you earn to live on, a sole trader is simpler, and in Jersey the tax ceiling is the same.
- Use the calculator with your own figures before you decide.
Advice from experience — the steps above are the rules.
Keep going
- Work for yourselfTrade as yourself, without a company: what you register, and what you are exempt from.Open
- Choose a registered officeThe official address every company must have: where it can be, whose permission it needs, and where it must be shown.Open
- Get a business licenceWho needs one in Jersey, who is exempt, how long it takes — and the three things it sets going.Open
- All of it, in orderPlan my start draws every journey you need, for your place, with your costs.Plan my start
Words in this journey:Company secretaryCertificate of incorporationClass 2 contributionsAnnual confirmation statementSole traderLimited company