Sole Trader vs Limited Company for Personal Trainers

Getting Started

Aug 15, 2022

By Tim Saye



As a personal trainer who runs their own business, you do not only need to concern yourself with putting together exercise programs and delivering personal training sessions or online coaching services. You also have administrative tasks, budget management, and accounting responsibilities, whether you like it or not.

All this can be made much easier if you choose a business structure that's right for you. But should you provide your services as a sole trader? Or is it better to launch a limited company? Continue reading to discover everything you need to know.

What is a sole trader?

If you are a sole trader, you are self-employed and run your own company as an individual. Once you have paid tax on your profits, you can keep them all. You are personally responsible for any losses you make.

As a sole trader, you have the following responsibilities:

• You need to keep records of expenses and business records.
• You must send a Self Assessment tax return once per annum.
• You need to pay Income Tax on your profits and Class 2 & 4 National Insurance.


The benefits of being a sole trader

For a lot of personal trainers, being a sole trader is the obvious choice, and here are the reasons why:

Keep your business details private.
If you form a limited company, your accounts must be published annually to Companies House. Your accountant will handle this for you, but these details are available on public record, meaning anyone can access them.

The information available for public consumption includes details about the director, shareholders, your business address, and your accounts.

Enjoy complete control.
You will have complete control and sole ownership over every element of your company, from the strategic direction of your personal training business to your daily operations.

You won't need to consult with shareholders or anyone else of this nature. Instead, you are completely in control and can run your business exactly how you wish.

You can easily change your business structure at a later date.
If you do decide that you want to establish your personal training business as a limited company in the future, nothing is stopping you from doing so. It's pretty easy. All you need to do is submit an online application.

On the flip side, if you want to go from a limited company to a sole trader, it is much more difficult. You will need to dissolve your business and step down as director if you wish to change the structure.

This is why a lot of personal trainers decide to start as sole traders and then see how things go from there.

You will have fewer statutory requirements.
Finally, you will have fewer administrative tasks and paperwork as a sole trader. There are lots of accounting and admin tasks that come with running a limited company. This includes filing your annual accounts, corporation tax return, confirmation statement, and several other event-based filings, which must be submitted to Companies House.


What is a limited company?

A limited company is a company 'limited by guarantee' or 'limited by shares.' The former tends to be for not-for-profit organizations.

As a personal trainer, you would establish your business as a 'limited by shares' company. This would mean that the company:

• Is legally separate from the people who run it.
• Can keep any profits made once the tax is paid.
• Has shareholders and shares.
• Has separate finances from your personal ones.


The benefits of setting up as a limited company

There are many different reasons why you may want to consider setting up as a limited company, including:

Reduce your personal liability.
One of the main reasons why personal trainers are tempted to set up as a limited company is because they reduce their own personal liability.

As a sole trader, any business debts would be your responsibility. However, this is not the case if you register your fitness business as a limited company.

Instead, you would be the company's director, so your personal finances are protected and kept out of the picture. This reduces risk considerably.

Should your business fall into debt, you would not be legally obliged to use your personal assets to pay it off.

Setting up a limited company is cheap.
There has long been a rumor that setting up a limited company is expensive and complicated. However, this could not be further from the truth.

You can register your limited company online, and it only costs £12. Plus, you can expect approval within 24 hours if everything is submitted correctly.

Enjoy tax advantages
Last but not least, limited companies are a lot more tax-efficient. You will pay corporation tax instead of income tax. The current corporate tax rate in the UK is 19%.

Please note that this is subject to change for any tax year in the future. However, it is less than the 20 percent income tax rate, and it is a lot less than the 40 percent you would need to pay if you earned between £50,271 and £150,000 per year.

You can also make some savings in terms of your National Insurance Contributions. This is because you will only pay NI on your salary but not on any dividends.

Because of this, many limited company directors opt to take a small salary and draw most of their income in the form of dividends, as this reduces their tax liability.


Should you set up as a limited company or sole trader?

So there you have it: an insight into both options available when setting up a personal training business. There is no right or wrong answer. It simply comes down to your circumstances.

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