The short answer: sole trader or limited company for a lorry driver?
Sole trader wins for most solo owner-drivers in 2026/27, and that is a change from the advice you will still hear in most transport cafes. The reason people keep repeating "go limited above £50,000" is that it was broadly true until April 2026. Two changes killed it. Dividend tax rose by two percentage points from 6 April 2026, so the ordinary rate is now 10.75 percent and the higher rate 35.75 percent. And a company with a single director and no other employees cannot claim the £10,500 Employment Allowance, so every pound of salary above the £5,000 secondary threshold carries 15 percent employer National Insurance that a sole trader never pays.
Put those together and the limited company route loses its edge for a driver who takes all the profit out as salary and dividends. You still get limited liability and a few genuine planning options, covered further down, but the headline "you'll save thousands by going Ltd" is no longer the reality for a one-person haulage business.
If you want the specialist view for your trade rather than a generic calculator, our accountants for transport and haulage page sets out how we handle owner-drivers, couriers and small fleets. This guide gives you the maths first so you can sense-check any advice you are given.
The 2026/27 numbers: take-home at £40k to £100k profit
At every normal owner-driver profit level in 2026/27, a solo limited company leaves you with slightly less in your pocket than sole trader when you draw everything out. The chart below plots the difference. Above the break-even line, the company would be ahead. It never gets there.
Here is the like-for-like comparison. "Profit" means what is left after all your running costs, so fuel, repairs, tyres, insurance, the truck through capital allowances, and everything else. For the limited company we assume the usual efficient set-up: a £12,570 director's salary and the rest drawn as dividends. The sole trader pays Income Tax and Class 4 National Insurance on the whole profit.
Reading it in plain money: at £50,000 profit the sole trader keeps about £1,400 more a year. At £60,000 the two are within £20 of each other. By £80,000 the sole trader is roughly £1,950 ahead, and at £100,000 the gap is about £4,100 a year in the sole trader's favour. Then you still have to pay for the extra company accounts on top, which widens it further. For the full structure comparison across other trades, our courier version of this guide shows the same pattern at lower profit levels.
Where a limited company genuinely tips ahead
A limited company still wins in three clear situations, and none of them is about drawing every pound out at the lowest tax. Recognise yourself in any of these and the maths swings back toward incorporating.
You leave profit in the business. This is the big one for growing owner-drivers. A sole trader is taxed on the whole profit whether they spend it or not, at up to 40 percent plus National Insurance. A company pays Corporation Tax at 19 percent on profits up to £50,000, so money you retain to buy a second truck, cover a quiet quarter, or build a deposit is taxed far more lightly while it sits in the business. If you are reinvesting rather than spending, the company can be well ahead.
A genuine spouse or partner works in the business. If your husband, wife or partner really does the invoicing, the compliance and the phones, making them a second director and shareholder can unlock the £10,500 Employment Allowance and let dividends use a second personal allowance and basic-rate band. On a decent profit, that combination can be worth a few thousand pounds a year between the two of you. It only works if the role is real: HMRC looks hard at income shifted to a spouse who does no actual work.
Limited liability and credibility matter. If you hold an operator's licence, sign contracts with larger hauliers, or finance expensive kit, a limited company ring-fences most business debt from your house and savings, and some clients simply prefer to contract with a company. That protection is worth real money in a bad year even when the tax is a wash. For the setup side of that decision, see how we handle limited company formation.
What a limited company costs you that a sole trader avoids
A limited company adds real cost and admin that a sole trader never touches, and this is often what tips a marginal decision. The tax gap is only half the picture.
First, the money. Company accounts and a Corporation Tax return (the CT600) cost more to prepare than a sole trader's Self Assessment, because there is a statutory format, Companies House filing and a confirmation statement to keep up each year. Second, the admin. You have director's duties, a separate business bank account, dividend paperwork and a public record at Companies House showing your accounts and your home or office address. Third, the National Insurance point from earlier: as a single director you cannot claim the Employment Allowance, so a normal salary carries employer National Insurance the sole trader simply does not pay.
There is one place the company has less admin, not more. From 6 April 2026, Making Tax Digital for Income Tax (MTD ITSA) is mandatory for sole traders with gross income above £50,000. That means digital records and five filings a year (four quarterly updates plus a final declaration) instead of a single tax return. A limited company sits outside MTD for Income Tax, so incorporating removes that quarterly cycle. For a driver already over the threshold, that is a genuine tick in the company column, though rarely a deciding one on its own.
The lorry-driver specifics: VAT, the truck and your O-licence
Three things matter far more to your bottom line than the structure choice, and they behave the same whether you are a sole trader or a company. Get these right first.
The truck. A lorry is plant and machinery, so it qualifies in full for the Annual Investment Allowance (AIA), which gives 100 percent tax relief on up to £1 million of qualifying spend in the year of purchase. Buy outright or on hire purchase and the year-one claim holds as long as the vehicle is in use by your year end. This is identical for both structures, so the truck is never the reason to incorporate. If you want the detail on how that plays out against a car, our guide on why a £40k truck saves the tax a £40k car does not walks through it.
VAT. Registration is triggered by turnover, not structure. Once taxable turnover passes £90,000 in any rolling 12 months you must register, sole trader or company alike. Plenty of owner-drivers on solid day rates cross that line, and once you do, the Flat Rate Scheme or standard VAT accounting becomes a real decision in its own right. It is worth a proper look because the wrong scheme quietly costs a haulier a few thousand a year.
Your operator's licence. If you hold a standard national or international operator's licence, the licence sits with the entity that holds it, and moving from sole trader to a limited company means the company needs its own licence and financial standing evidence. That is not a reason to avoid incorporating, but it is a step that has to be sequenced properly, because trading under the wrong licensed entity is a compliance problem the tax saving would never justify.
None of this is exotic. It is knowing which levers actually move your number. The structure is one lever, and for a solo driver in 2026/27 it is a smaller one than most people assume.
Here is how the three common ways to make this decision actually compare:
| What you need | Online calculator | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Models both structures on your real day rate and costs | ● Generic inputs | ● If asked | ✓ Built into onboarding |
| Uses the April 2026 dividend rise and no Employment Allowance | ✗ Often outdated | ● Sometimes | ✓ 2026/27 figures |
| Times incorporation to the right point, not just £50k | ✗ | ● | ✓ Draw vs reinvest test |
| Handles the truck AIA, VAT scheme and O-licence together | ✗ | ● | ✓ One joined-up review |
| Reviews a genuine spouse or family shareholder properly | ✗ | ✗ | ✓ Settlements-safe |
| Open Mon to Sat for a quick year-end decision | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
This is why owner-drivers weighing up incorporation tend to want a specialist who looks at the whole picture, not just a headline tax figure.
What this means for you: how to decide
Start with one question: are you drawing all your profit out, or leaving some in to grow? That single answer points you most of the way there.
- If you take it all out and work solo: sole trader is usually the better structure in 2026/27, simpler and slightly cheaper on tax. Do not incorporate just because someone said "above £50k".
- If you are reinvesting to grow the fleet: a limited company holds retained profit at 19 percent Corporation Tax, which can beat paying up to 42 percent as a sole trader on money you are not even spending. This is the strongest case to incorporate.
- If a spouse or partner genuinely works in the business: a company can share income across two allowances and unlock the Employment Allowance. Get the roles and shareholdings set up properly so they stand up to scrutiny.
- If limited liability matters for your operator's licence, finance or contracts, weigh that as a real benefit even when the tax is level.
- Whatever you pick, sort the truck, the VAT scheme and the licence first. Those move more money than the structure does.
The honest answer for most one-person owner-drivers this year is that sole trader is fine, and often better. Incorporate for a reason, a growth plan, a family income split, a liability concern, not out of habit. If you want a straight answer on your own numbers, that is exactly the kind of thing a 15-minute call settles quickly.