Budget 2026: what it means for you and your business —
In short
The structure you choose — sole trader, partnership, LLP or limited company — affects your tax, your liability, what you must publish, and how easily you can bring in investors or reward staff later. There is no profit level at which incorporation automatically becomes right: it depends on your profits, how much you draw, your risk and your plans. We model both scenarios on your actual numbers before you commit.
Sole trader — simple, private, and all profit is taxed on you at income tax and National Insurance rates. No public filing. Unlimited personal liability.
Limited company — limited liability, potentially more tax-efficient above a certain profit, more credible with some customers and lenders. But: accounts on the public record, more administration, and the 2026/27 dividend rates now bite harder (a £500 allowance, and rates of 10.75% / 35.75% / 39.35%).
The crossover point has moved. It depends on how much profit you actually need to draw versus retain, your appetite for risk, and whether you plan to bring in investors or key staff. We run both.
A general partnership is simple but exposes each partner to unlimited liability, including for the acts of the others — which is a serious exposure people rarely think through.
An LLP gives limited liability while retaining tax transparency (profits are taxed on the partners, not the entity). It files accounts publicly and is subject to size thresholds broadly mirroring those for companies.
Either way, a partnership agreement is essential — profit shares, capital, decision-making, and what happens when a partner leaves or dies. Partnerships without one fail badly.
Register with HMRC (self-employment, or corporation tax within three months of trading), and for PAYE, VAT and CIS as applicable. Set up cloud accounting from day one — retrofitting records is far more expensive than keeping them. Understand your MTD position — sole traders and landlords with gross income over £50,000 have been in MTD for Income Tax since April 2026. Budget for tax. The single most common failure in year one is spending money that belonged to HMRC. Set the share structure properly, if incorporating. See Company Formations.
The most common — and most avoidable — cause of failure in a new business is spending money that was never yours. Open a separate account, move a percentage of every receipt into it, and never touch it. We’ll tell you the right percentage for your situation.
We model both structures on your numbers — not a rule of thumb.
We’ll tell you not to incorporate if that’s genuinely the right answer.
All registrations handled — HMRC, PAYE, VAT, CIS.
Cloud accounting from day one — so you never have to reconstruct year one.
Chartered (ICAEW) since 1947 — we’ve watched a great many businesses start.
This page provides general information about the 2026/27 UK tax year and is not advice on your particular circumstances. Tax and regulatory rules change frequently. Please contact us before acting, or refraining from acting, on anything set out here. LMJ Group is a firm of Chartered Accountants regulated by the ICAEW. LMJ Group is not a registered auditor and does not provide audit services. Last reviewed: July 2026.
