Running your own business in the building trade means you're used to making big decisions. But one that often gets overlooked is how your business is legally structured. Whether you're a self-employed plumber, run a roofing team with your partner, or manage a growing construction firm, the structure you choose, i.e. sole trader, partnership or limited company, can make a big difference to how much tax you pay, your legal responsibilities and even how clients and suppliers perceive your business.
In this blog we run through the different business structures to help you decide which is the best route for you to adopt.
But first………
Why your structure matters more than ever
From April 2026, MTD for Income Tax will affect many self-employed people with turnover over £50,000. That means significant changes in how your income and expenses are recorded and submitted to HMRC. It could also be a trigger to reconsider whether your current setup is still the right one. To see if MTD for Income Tax will affect you, read our Guide to MTD.
At DWilkinson&Company, we work with business owners across Rochdale and the surrounding areas, helping them make informed decisions based on the numbers, not guesswork.
Below we have set out what each structure involves.
Sole trader: simple but risky
This is the most straightforward way to set up and run your trading business. You're in control, the paperwork's minimal, and it's easy to manage. For tradespeople just starting out or working alone, it's often the go-to route they take.
But there's a catch: you and your business are legally the same. That means if things go wrong, e.g. debts, disputes, or damage, your personal assets could be on the line.
With MTD approaching, you'll need to start keeping digital records and submitting quarterly income and expense returns. That's a change from the once-a-year tax return you might be used to.
Good for: sole workers, side gigs, or small jobs with minimal overheads.
Watch out for: unlimited liability and less credibility with larger clients.
Partnership: shared effort, shared risk
If you're running a business with someone else, maybe a fellow builder, electrician or even your other half, a partnership might feel like the natural choice. You share the workload, the decisions, and the profits.
But you also share the risk. Just like a sole trader, partners are personally liable for debts. If your partner racks up a big bill, you could also be liable for paying it back.
On the plus side, it's still relatively easy to set up and manage, and there's room to formalise how the partnership works with a written agreement (which we always recommend).
Good for: small teams or family-run businesses.
Watch out for: disagreements and shared liability.
Limited company: more protection, more paperwork
Setting up as a limited company means your business is a separate legal entity. That offers protection for your personal assets if the business runs into trouble, a big plus in higher-risk sectors like construction.
It can also look more professional to clients, especially for bigger contracts or commercial work. And from a tax point of view, there can be perks, especially if your profits are on the higher side and you can split your income between salary and dividends.
But you'll have extra admin, accounts to file with Companies House, and more rules to follow. It's not difficult, but it does need proper setup and support.
Good for: growing businesses, higher turnover, taking on employees.
Watch out for: more admin and compliance responsibilities.
What about tax?
Recent changes in tax laws have shaken up what's likely to be the most tax-efficient business trading route to take. With more tax changes or increases likely, the tax considerations of each option should be thoroughly reviewed before making any decisions. For example, as of September 2025, the key tax rules include:
- Dividend allowances for company directors are down to just £500 (the allowance was £2,000 up to April 2023).
- Corporation tax is now 19% if your profits are under £50,000 and 25% for profits over £250,000. If your annual profit lies between £50,000 and £250,000, you pay a marginal relief rate of corporation tax, based on a gradually increasing scale.
- National Insurance Contributions (NICs) have been simplified, with Class 2 being scrapped for self-employed people earning over £12,570. The Class 4 rate has been reduced from 9% to 6% if your profit is between £12,570 and £50,270. Profit above this higher threshold will be taxed at 2%.
With MTD for Income Tax now firmly on the radar, many sole traders are finding the digital admin involved is pushing them to rethink their setup entirely.
The team at DWilkinson&Company can help you cut through the complexity and compare the tax implications of each structure to help you make the best decision based on your circumstances.
Why reviewing your setup matters now
Whether you're laying bricks or fitting kitchens, your business structure might not be something you think about every day. But making the wrong choice, or sticking with something that no longer suits, could cost you thousands in unnecessary tax or leave you exposed if things go wrong.
Let DWilkinson&Company help you make the right call
We've helped plenty of tradespeople around Rochdale figure out the best setup for their business. We don't deal in guesswork. We'll sit down with you, understand how you work, and crunch the numbers to show what each option would mean in real terms, for tax, take-home pay, admin and risk.
If the figures indicate it's time to switch, we can help you make the transition smoothly. And if your current setup still stacks up, we'll confirm that too, so you're not changing things for the sake of it.
Book a free consultation with DWilkinson&Company today. Simply call 01706 249058 or email office@dwco.co.uk.
