Should I become a limited company as a delivery driver?
A Simple Guide to Company Structures
Not sure whether to register as a Limited Company (Ltd.) or stay as a sole trader? Here’s what delivery drivers need to know: easy, quick and focused on real numbers.
Key Takeaways
Ltd. companies are usually able to keep more of their profit, particularly at higher profits, and better options for working with leading delivery platforms.
There’s more admin and cost, but many drivers find it’s worth it if you want to grow.
Use a good accountant or access straightforward resources and can keep things simple and help you avoid overwhelm.
What’s the Difference?
Sole trader:
You and your business are legally the same
Easy setup, less paperwork
You’re responsible for any business debts – if your business can’t pay its bills, you could be required to pay from your own money or possessions
Limited Company (Ltd.):
Your business is a separate legal entity
More rules and admin
Your personal assets (e.g. car and house) are better protected
What are the benefits of choosing Ltd.?
Take Home More: On £45,000 profit, a Ltd. driver can keep over £1,160 more than a sole trader after tax.
Greater Protection: Your personal property is safer if your business has trouble.
More Opportunities: Larger clients and delivery platforms, often prefer to work with Ltd. companies.
Professional Reputation: You can look more established and trustworthy to clients as a Ltd. company
Extra Benefits: Pay into a company pension before tax and claim more expenses (like vehicle, phone, some home costs).
What are the challenges of choosing Ltd.?
Becoming a Ltd. company comes with a bit more admin and paperwork, and these can lead to some extra costs. However, there’s lots of government information and support available to make the process much easier.
Register your company (one-off fee, usually £12–£100).
You may want to pay for an accountant (typically £600–£1,500/year). Not legally required, but very helpful for handling your accounts, tax, and paperwork.
File annual accounts and a confirmation statement with Companies House. (These are legal requirements for all Ltd companies. For more info, see: GOV.UK – Running a Limited Company)
Business insurance may be required or recommended (such as public liability insurance, professional indemnity, or employer’s liability if you have staff). Costs vary depending on your business.
Keep more detailed business records and complete extra forms for tax and company purposes
How much can I earn?
How much you take home depends on the type of jobs you do, how often you work or how consistently you can find routes, how well you manage your bookings. But your business setup, Sole Trader or Ltd Company, also affects how much you keep after tax.
(Note – numbers are estimates for an example)
Example: If you earn £45,000 profit in a year
As a Sole Trader:
You pay Income Tax and National Insurance on your profits.
After all taxes, you take home about £35,400.
As a Ltd Company:
You can split your earnings: pay yourself a salary and take the rest as dividends.
Your company pays Corporation Tax, and you pay some tax on dividends (usually less than income tax/NI).
After all taxes, you take home about £36,600.
What’s the main difference?
With a Ltd. company, you have more ways to pay yourself and usually pay less National Insurance. Even though there are other business taxes, your take-home pay can be higher, by over £1,100 in this example.
Don’t worry about the exact numbers!
The key thing to know is:
As a Ltd. company, you can use salary and dividends for better tax efficiency.
For many drivers, this means keeping more of what you earn.
Can you handle the extra admin, or will you pay for professional help, such as an accountant?
Will your extra tax savings cover the accountant and company running costs?
Do your clients or platforms prefer Ltd companies?
Are you planning to grow your business or keep it small?
Main takeaway:
A Ltd company usually lets you pay less National Insurance and gives more flexibility in how you pay yourself, so you could keep more of your earnings each year.
Don’t get lost in the numbers! What matters is that Limited Companies offer more tax-efficient ways to take your income, making them a popular choice for many growing businesses.
Tip: Want more detail? Compare advice and check out trusted resources:
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
