The Real Price of Being Limited
If you're running a conservatory installation business, kitchen extension firm, or general home improvement company, chances are someone has told you that operating as a limited company is the smartest move. And in many cases, they're right. But here's what gets glossed over in those conversations: limited company status comes with a bill attached. Not just the Corporation Tax on profits, but a stack of other costs that quietly add up each year.
Let me walk you through what you're actually looking at financially when you choose to trade as a Ltd rather than as a sole trader.
The Obvious Costs Everyone Knows About
Your Corporation Tax bill is the headline figure, and it's significant. Currently set at 25% on profits over £250,000 per year, and a smaller rate of 19% below that threshold. If your roofing extension business turns over £300,000 and you make £80,000 profit, you're paying £19,000 in Corporation Tax before you've taken a penny home as dividends or salary.
Then there's your accountancy bill. A sole trader filing a simple tax return might pay £200 to £400 annually. As a limited company director, you're looking at £500 to £1,500 per year depending on how much help you need. That's not because accountants are greedy. It's because your company filing requirements are genuinely more complex. You need to file accounts at Companies House, prepare a director's report, and ensure everything squares with your tax return.
For many home improvement firms handling regular subcontractors, payroll costs add another layer. If you're running payroll software, that's typically £50 to £150 per month. If you're paying an accountant to run it for you, add another £300 to £600 per year.
The Costs Nobody Talks About
Here's where it gets interesting. Running a limited company comes with compliance demands that directly cost money.
Insurance is a good example. Your professional indemnity insurance for a conservatory installation company might cost £400 to £800 annually. Some insurers actually charge slightly more for limited companies because of the regulatory scrutiny involved. It's not huge, but it's real.
Then there's the filing obligation at Companies House. Filing your accounts late (more than 28 days past the deadline) costs you £150 for the first offence. Do it again and you're looking at £375. This might sound like an incentive to be on time rather than a core cost, but if you're working with an accountant who charges rush fees when deadlines slip, you'll pay extra for that too.
Bank charges for business accounts are another hidden expense. Many banks charge £10 to £30 per month for a limited company current account. A sole trader gets something similar for free. Over a year, that's £120 to £360 that a self-employed roofer or kitchen fitter wouldn't pay.
Directors' liability insurance is another one. If you've got employees (even one), your insurer may insist on this. It typically costs £100 to £300 annually. It protects you personally if the company faces claims, which is theoretically why you incorporated in the first place, but it costs money nonetheless.
The Tax Situation Gets Complicated
As a sole trader installing extensions, you pay Income Tax on your profits. It's straightforward. As a limited company director, the maths are different and often more expensive.
Let's say you want to take £50,000 from your conservatory business in profit. As a sole trader, you'd pay Income Tax and National Insurance on the lot. As a limited company, you have a few options, and none are as simple.
Option one: take it all as salary. Fine, but you'll pay employee's National Insurance (8% above £12,570) and employer's National Insurance (15% above £9,100). That's expensive.
Option two: take a salary of around £12,570 and the rest as dividends. Now you're looking at Corporation Tax on the profits (25%), then Income Tax on the dividends (20% for higher earners). The maths often work out better than a full salary, but you need to actually calculate it. Many directors who wing it find they've paid more than they needed to.
This is where working with a competent accountant really does pay for itself. They can structure your drawings to minimise tax. But that costs money, and you need to factor it in.
The Administrative Time Burden
This isn't a direct cash cost, but it is a cost. Running a limited company means paperwork. Statutory registers, minute books, shareholder records, director's duties. If you're the sort of person who records everything meticulously, you'll spend time on compliance. If you're not, your accountant spends time sorting it out and charges you for the privilege.
For a small home improvement firm, this could mean 5 to 10 hours per year on administration that a sole trader wouldn't need to do. At £25 per hour (a conservative internal rate), that's £125 to £250 in your time.
When It's Still Worth It
All of this makes it sound like limited company status is a bad deal. It's not, in most cases. The liability protection is genuine. You're not personally responsible for company debts. That matters in a sector where things go wrong sometimes. A defective conservatory installation, a structural problem, a dispute with a customer. The company faces the claim, not your personal assets.
For most home improvement businesses turning over more than £100,000, the tax efficiency of a limited company structure outweighs these costs. But you need to know what you're paying. Too many directors operate blind to their actual compliance spend.
Know your costs. Know why you're incorporated. If you're doing it just because you thought it sounded professional, you might be wasting money. If you're doing it for genuine liability protection and tax efficiency, then the costs are simply part of doing business properly.
