Guides · Updated 13 October 2026
Sole trader or limited company. What actually differs.
Most locums start as sole traders and some later move to a limited company. Neither is right for everyone. This sets out what changes between the two, so you know what to ask an accountant.
As a sole trader
You and the business are the same thing in law. You keep the profits after tax, and you report your income through Self Assessment. The other side of that is unlimited liability: you are personally responsible for the debts of the business.
Through a limited company
A limited company is legally separate from the people who own it. As a director you are responsible for running it, and that carries duties of its own.
- Keeping company records and preparing annual accounts.
- Filing a Company Tax Return and paying Corporation Tax.
- Filing a confirmation statement with Companies House each year.
- Taking money out in the proper way, as salary or dividends.
Example: What is sent in each year
- Sole trader: One Self Assessment tax return
- Limited company: Annual accounts, a Company Tax Return and a confirmation statement
- A company's director: Usually a Self Assessment return of their own as well
A general picture. An accountant will tell you exactly what applies to you.
What locums usually weigh
The tax position depends on your income and how you take it, which is a calculation for an accountant, not a guide.
- Admin: a company has more to file, and most directors pay an accountant to do it.
- Liability: a company keeps business debts separate from your own.
- IR35: the off-payroll working rules apply to people working through their own company.
- How workplaces and agencies want to engage you. Some will only book one or the other.
Changing later
You are not locked in. GOV.UK notes that you can move from one structure to another, and that it is usually easier to go from sole trader to limited company than the other way.
How the money reaches you
As a sole trader the profit is yours as it is earned. In a company the money belongs to the company first, and you take it out as salary or dividends, each with its own rules. That step is where most of the extra paperwork comes from.
Insurance and contracts
Check what your indemnity cover says about working through a company, and whether bookings would be made with you or with the company. Sort both out before the first session under the new arrangement.
Questions to ask an accountant
- At my level of income, what is the difference after tax and fees?
- What would you charge each year to look after a company?
- How would the off-payroll rules affect the bookings I take?
- What changes if I want to stop, or go back to being a sole trader?
Where Locbase fits
Either way you need the same record: every session, what was invoiced and what was paid. Locbase keeps it and exports it for whoever does your accounts.
Questions
Do locums need a limited company?
No. Many work as sole traders. Whether a company suits you depends on your income and circumstances, so take advice before setting one up.
Can I switch from sole trader to limited company?
Yes. You can move from one structure to another, and going from sole trader to limited company is usually the easier direction.
Is a limited company more work than being a sole trader?
Yes. A company has accounts, a Company Tax Return and a confirmation statement to file each year, and most directors pay an accountant to do it.
Does a limited company protect me if something goes wrong?
A company keeps business debts separate from your own. It does not replace professional indemnity cover.
Read next
Try Locbase free for 1 month. Then £14.99 a month or £119 a year.
This guide is general information, not tax or legal advice. Check with HMRC or a qualified accountant. Sources: GOV.UK: set up a business; GOV.UK: set up as a sole trader; GOV.UK: running a limited company.