- A sole trader is the default: register, file a Self Assessment return, pay income tax and Class 4 National Insurance on the whole profit.
- A limited company pays corporation tax on profit, and you then take money out as salary and dividends. It separates your liability and your business's money from yours.
- The tax saving is real but modest and has shrunk: budget roughly £50,000 of profit as the level where incorporating starts to make sense, once accountancy costs are counted.
- Incorporating costs privacy: a registered office address and your name as a director and person with significant control appear on the public Companies House register. There are ways to limit what shows; there is no way to be invisible.
- For an agency the question is different: incorporate from day one, because the risk is contractual and personal, not fiscal.
Texts and figures checked on August 11, 2026. Sources are listed at the end of the article.
In the UK the question arrives with a specific trigger: the second January bill, the one that includes payments on account and lands at about 150% of what was expected. That is usually the moment someone types "should I go limited". The answer depends on three things that get mixed together (tax, liability and privacy), and for a creator the third one often decides it.
Sole trader: simple, exposed, private
As a sole trader you register for Self Assessment, keep records, and file once a year. Income tax at 20/40/45% and Class 4 National Insurance at 6% then 2% apply to the whole profit, whether you spend it or leave it in the account. The details are in our Self Assessment guide.
Two consequences follow.
You and the business are the same person. A contractual claim, a supplier dispute, a claim from someone you engaged: it reaches your personal assets. For a solo creator with no staff and no third-party money, that risk is low but not zero.
Nothing about you is on a public register. No director's name, no registered office, no filings. For someone whose entire commercial identity is a stage name, that is a genuine asset, and it is the thing incorporation costs you.
Limited company: separation, at a price
A limited company is a separate legal person. It earns the income, pays corporation tax on its profit, owns the bank account, and signs the contracts. You are a director and shareholder, and you extract money deliberately.
The tax picture, in two layers
Corporation tax applies at the small profits rate up to £50,000 of profit, the main rate above £250,000, with marginal relief between the two. What is left is yours to take out:
- Salary through PAYE, usually set around the National Insurance thresholds so that the year still counts for the State Pension without triggering much employer or employee NIC;
- Dividends from post-tax profit, taxed at the dividend rates after a small dividend allowance;
- or nothing at all, leaving profit in the company until a year when you need it or your personal rate is lower.
That last option is the underrated one. A sole trader is taxed on a spike whether or not they spend it. A company lets a very good year be smoothed into a normal one, which, in a sector where income can double and halve in eighteen months, is worth more than a headline rate comparison.
Where the break-even sits
Successive increases to dividend tax and to corporation tax have narrowed the gap that used to make incorporation obvious. As a working rule:
| Annual profit | Realistic view |
|---|---|
| Under £30,000 | Stay a sole trader unless liability or a contract requires otherwise |
| £30,000 – £50,000 | Marginal. The saving is often smaller than the accountancy cost |
| £50,000 – £100,000 | The point where it usually starts to pay, especially if you do not need to withdraw everything |
| Above £100,000 | A company is normally the right tool, for timing as much as for rate |
Against any saving, count the running costs honestly: £1,200 to £3,000 a year for accounts, corporation tax return, payroll and confirmation statement, plus your own time. And count the friction: dividends require distributable profits and paperwork, and a director's loan account used as a current account creates a section 455 charge and an unpleasant conversation with your accountant.
The privacy cost, which nobody mentions first
This is the part that matters most to creators and gets discussed least.
Incorporating puts on the public Companies House register: the company name, its registered office, and for each director and each person with significant control a name, month and year of birth, nationality, country of residence and a service address. It is free to search, indexed, and copied by third-party sites within days.
What you can do:
- Use a service address (an accountant's or a formation agent's) rather than your home. This is standard and entirely legitimate.
- Apply to have your residential address protected from public disclosure where there is a risk of harm. It is a real route, it is used by people in this sector, and it requires evidence.
- Choose a company name that is not your stage name and not your legal name.
What you cannot do is keep the director's name off the register. Nominee directors do not solve it: the PSC rules exist precisely to identify who is really behind the company, and a false PSC filing is an offence.
So the sequence matters. If your name is the thing you most need to protect, and the tax saving at your current profit is £1,500 a year, incorporating early is a bad trade. Revisit it when the numbers make the trade worth making, and structure it properly when you do.
Agencies: incorporate first, optimise later
For an OFM agency the analysis inverts. The reason to have a company is not tax; it is that the business generates obligations to other people.
An agency signs management contracts with creators. It engages chatters, managers and editors. In many arrangements, money that ultimately belongs to a creator passes through its account. Each of those is a route by which a dispute becomes a claim, and without a company, a claim against the founder personally.
Add to that the practical realities: banks and payment providers deal far more readily with an incorporated business than with a sole trader in this sector, professional indemnity cover assumes an entity, and any eventual sale of the agency requires something to sell. An agency operating in a personal name has no exit, only a wind-down.
If you engage chatters, the status question sits alongside the structure question and is at least as expensive to get wrong: worker status, holiday pay and the National Minimum Wage are the claims that surface when a relationship ends badly. We cover the exposure in Is an OFM agency legal in the UK.
In short
Sole trader below about £50,000 of profit, unless liability or a counterparty pushes you the other way. Limited company above it, taking a small salary and dividends, and using the company to smooth an uneven income rather than chasing a headline rate. Understand before you file that your name becomes public, use a service address, and consider address protection if there is a real risk. And if you run an agency, form the company now: the reason is the contracts, not the tax.
This guide is general information, not UK legal or tax advice. We work with creators and agencies on contracts and structuring, alongside a UK accountant for the filings.
Frequently asked questions
Is a limited company better than being a sole trader for OnlyFans income?
Will my real name be public if I form a company?
How do I pay myself from a limited company?
What is corporation tax on a small company?
Does a limited company protect me if something goes wrong?
I run an agency. Same answer?
Sources and legal texts
- Set up a limited company: step by step GOV.UK
- Corporation Tax rates and reliefs GOV.UK
- Tax on dividends GOV.UK
- People with significant control (PSC) Companies House
- Apply to protect your details on the Companies House register Companies House
- Director's loans GOV.UK
This article is general information and does not replace advice tailored to your situation. OFM Legal is not a law firm: court proceedings are handled by our partner lawyers.
