Sole trader vs limited company for selling online
Most people start selling online as a sole trader because it's simple: register for Self Assessment with HMRC and pay income tax on profits. A limited company adds paperwork but separates your personal liability, and can be more tax-efficient once profits grow. Ask an accountant which suits you.
By Abdullah Ashraf, Shopify expert · Last updated: October 2026
Quick summary
- Sole trader: simple, personally liable.
- Limited company: more admin, limited liability.
- Many switch once profits grow.
In this guide:
Sole trader
- Register for Self Assessment once trading income is over £1,000
- Pay income tax and National Insurance on profits
- Minimal admin
- You are personally liable for debts
Limited company
- Register with Companies House
- Pay Corporation Tax on profits
- File annual accounts and a confirmation statement
- Liability generally limited to the company
Which to choose
Start as a sole trader if you're testing an idea. Consider a limited company as profits rise, or if liability matters. Get advice from an accountant.
Frequently asked questions
Can I sell on Shopify as a sole trader?
Yes. See details.
Do I need to tell HMRC about Shopify income?
Official sources
- Set up as a sole trader (GOV.UK)
- Register for Self Assessment (GOV.UK)
- Set up a limited company (GOV.UK)
- Tax-free allowances on trading income (GOV.UK)
Checked September 2026. Rules change, so always check the latest official guidance.
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