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United Kingdom companies, holding companies and trusts

What each one saves, what it costs to run every year, the point where it starts paying for itself, and where people get caught out. 2025/26 figures.

A structure is a tool, not a trick. If the yearly cost of running it is bigger than the tax it saves, you are worse off. Nobody should set any of these up in United Kingdom without a qualified adviser running your real numbers first.

Build my strategy United Kingdom deductions and forms

Real numbers from people using these

Trade through a limited company

The business becomes its own legal person. It pays corporation tax, then you take money out as pay and dividends.

Often 3,000 to 8,000 a year on profits above roughly 60,000, plus control over when you take income.

£200 to £1,500 to set up, then £900 to £2,500 a year.

Worth it when: Usually once profits pass about 50,000 to 60,000, because the accountancy and filing costs are fixed.

Priya, 38, freelance developer, £95,000 of profit

As a sole trader she pays income tax and Class 4 on all £95,000. In a company she takes a £12,570 salary, leaves £30,000 in the company and pays dividends on the rest.

Roughly £4,900 less tax in year one, minus about £1,600 of accountancy, so around £3,300 kept. Money left in the company is only taxed again when she takes it.

Rule behind it: Corporation tax 19% to 25%, dividend rates 8.75% / 33.75% / 39.35%

Have an adviser set this one up.

Put a holding company above your trading company

One company owns the other. Profits can move up to the parent and be reinvested rather than taken out and taxed.

Lets you bank profits, buy property or another business without a personal tax hit on the way.

£1,500 to £6,000 to set up, then £1,200 to £3,500 a year.

Worth it when: Only sensible when there is real surplus profit, usually 100,000 or more sitting in the trading company.

Tom, 51, owns an agency making £220,000 a year with £400,000 of cash piled up

A holding company is put above the agency. £400,000 moves up as an exempt inter company dividend and buys a small commercial unit.

Nothing personal is taxed on the move. Taking the same £400,000 out himself would have cost about £157,000 in dividend tax at 39.35%. Setup and yearly costs run £3,000 to £9,000.

Rule behind it: Substantial shareholdings exemption and group relief rules

Have an adviser set this one up.

Set up a trust for your family

You hand assets to trustees to hold for people you name, so the value leaves your estate over time.

Can take 40% inheritance tax off the growth, and controls who gets what and when.

£2,000 to £8,000 to set up, then £1,000 to £3,000 a year.

Worth it when: Realistic above roughly 325,000 of assets you can genuinely give away, and you must survive seven years.

Alan and Susan, 72 and 70, estate of £1.4m including a second home

They put £325,000 of investments into a discretionary trust and live seven more years.

£325,000 plus its growth is outside the estate. On the original sum alone that is £130,000 less inheritance tax. Ten year charges of up to 6% and £1,000 to £3,000 a year of trustee costs come off that.

Rule behind it: Nil rate band 325,000, ten year charges up to 6%, seven year rule on gifts

Have an adviser set this one up.

Every United Kingdom structure, with the risks

Limited company instead of sole trader

Some admin
Best for
Profits above roughly 50,000 that you do not need to draw in full
What it saves
Typically 5% to 9% of profit once you mix a small salary with dividends and company pension contributions
What it costs
Accountancy 900 to 2,000 a year, plus company filings and a separate bank account
Break even
Usually worth it above about 50,000 of profit, rarely worth it below 30,000

How it is set up

  1. Have an accountant compare sole trader and company tax on your real profit.
  2. Incorporate at Companies House and register for corporation tax.
  3. Set a deliberate salary and dividend policy, and pay pension from the company.

Watch out: Money in the company is not your money. Taking it out badly (overdrawn director's loan) creates its own tax charge.

Holding company over a trading company

Serious admin
Best for
Owners who want to build up cash or property outside the trading risk
What it saves
Dividends between UK companies are normally tax free, so profits move up without a personal tax charge
What it costs
A second set of accounts and filings, and more care over group paperwork
Break even
Worth considering once the trading company retains six figures or you plan to sell

How it is set up

  1. Get advice on the share exchange and clearance from HMRC where needed.
  2. Move retained profit up to the holding company by dividend.
  3. Keep the trading company clean of investment assets so business reliefs are not lost.

Watch out: Holding investments in a trading group can put Business Asset Disposal Relief and inheritance tax business relief at risk.

Discretionary trust for family wealth

Serious admin
Best for
Passing on wealth while keeping control over when children receive it
What it saves
Assets can leave your estate after seven years, and growth happens outside it
What it costs
Setup 1,500 to 5,000, plus trustee admin and its own tax returns
Break even
Rarely worth the cost below about 250,000 of assets

How it is set up

  1. Decide what the trust is really for: control, protection, or tax.
  2. Have a solicitor draft it and appoint trustees you trust.
  3. Watch the 20% entry charge above the nil-rate band, and the ten year charge.

Watch out: Trusts pay tax at high rates on income they keep, and there are entry, exit and ten yearly charges. This needs professional advice.

Holding rental property in a company

Some admin
Best for
Higher rate landlords building a portfolio they will not sell soon
What it saves
Full mortgage interest deduction instead of the restricted 20% credit
What it costs
Stamp duty and capital gains tax on moving existing property in, higher mortgage rates
Break even
Usually only worth it for new purchases, or portfolios of three or more properties

How it is set up

  1. Model the tax on transferring existing property before you move anything.
  2. Buy new properties through the company rather than transferring old ones.
  3. Plan how you will take money back out, because that is taxed again.

Watch out: Moving your own properties into a company is a sale for tax purposes. The stamp duty and capital gains bill often wipes out the saving.

Selling the business with Business Asset Disposal Relief

Some admin
Best for
Owner-managers selling shares in their trading company
What it saves
A reduced capital gains rate on qualifying gains up to a lifetime limit of 1 million
What it costs
Requires two years of qualifying ownership and a genuine trading company
Break even
Always check eligibility before agreeing a sale, not after

How it is set up

  1. Check you have held at least 5% for at least two years.
  2. Clean up any large investment assets sitting in the company.
  3. Time completion to suit the tax year and your other income.

Watch out: Too much cash or property in the company can make it fail the trading test.