Quick Answer
For small to medium home repairs, a well-reviewed sole trader is often better value. For larger projects (£5,000+), a limited company offers stronger insurance, continuity if a worker is absent, and more formal dispute resolution. VAT registration — not business type — is what affects your invoice cost most.
When you need home repairs or improvements done in 2026, you will typically receive quotes from one of two types of business: a sole trader (an individual running their own business) or a limited company (a registered business entity with shareholders and directors). The choice between them affects your cost, your consumer protection, the quality of work, and what happens if things go wrong.
This guide cuts through the confusion to help you understand the practical differences, when each type is more appropriate, and how to evaluate each on its own merits rather than making assumptions based on business structure alone.
In this guide
Sole Trader vs Limited Company: Key Differences
| Factor | Sole Trader | Limited Company |
|---|---|---|
| Legal liability | Unlimited — personal assets at risk | Limited to company assets |
| VAT registration | Only if turnover >£90k (voluntary otherwise) | Same threshold, but more likely to be registered |
| Insurance | Often lower liability limits; no employer's liability if solo | Typically higher limits; employer's liability required if staff |
| Continuity | Work stops if they're ill or unavailable | Other staff can continue the project |
| Accountability | Personal reputation on the line | Brand reputation; director accountability |
| Dispute resolution | Small claims court or trade body | Same, but company may have formal processes |
| Cost (typically) | 10–20% lower due to lower overheads | Higher overhead may be reflected in quotes |
| Professional body membership | Can be NFRC, FMB, NICEIC etc. | Same — often required for larger firms |
The most important takeaway: business structure is far less important than checking qualifications, insurance, reviews, and references. An excellent sole trader will almost always outperform a mediocre limited company. The comparison matters most at the margins — when all other factors are equal, business structure may affect your decision.
VAT: The Biggest Cost Difference
VAT is where the financial difference between hiring a sole trader and a company is most likely to be felt. Any business — sole trader or limited company — with annual turnover above the VAT registration threshold (£90,000 in 2026) must charge VAT at 20% on their services. Businesses below the threshold can choose to register voluntarily or not.
In practice, many sole trader tradespeople (particularly those doing mostly domestic work) operate below the VAT threshold and are not VAT-registered. This means their invoices do not carry VAT — an instant 20% saving for the homeowner.
Larger companies almost always exceed the threshold and charge VAT. On a £10,000 job, the difference is £2,000. This is not the company's profit — it is a tax they collect on behalf of HMRC — but it affects what you pay.
Always confirm whether quotes are inclusive or exclusive of VAT before comparing. A sole trader quoting £8,000 excluding VAT (where they are VAT-registered) is actually pricing at £9,600 — making a company quoting £9,500 inclusive cheaper. For more on getting accurate comparable quotes, see our guide on how to get multiple quotes for home work.
Insurance Differences
Both sole traders and companies can and should carry public liability insurance. The practical differences come in the required and typical levels of cover:
- Sole trader with no employees:
Public liability insurance only is legally required. Most carry £1–2m. Higher is better for complex jobs.
- Sole trader who uses subcontractors:
Should carry employer's liability insurance as well (often required when working alongside others). Check this if they plan to bring in help.
- Limited company with employees:
Employer's liability insurance of at least £5m is a legal requirement. Public liability cover is typically higher (£5–10m).
- Both types:
Contract works insurance (protecting the partially complete project) is available to both. Ask specifically whether this is in place for larger jobs.
For any job, ask to see the insurance certificate. The type of business is less important than the level of cover. For more on what to ask about insurance, see our guide on 10 questions to ask before hiring a tradesperson.
Dispute Resolution Differences
If something goes wrong, the business structure affects your options:
With a sole trader: the dispute is between you and an individual. If they are a member of a trade body (FMB, NFRC, NICEIC), you can use that body's dispute resolution process. If not, your options are direct negotiation, small claims court (up to £10,000), or a consumer ADR (Alternative Dispute Resolution) scheme.
With a limited company: the same options apply, but the company itself has legal standing. This can be advantageous (the company has assets and a brand reputation to protect, giving them more incentive to resolve disputes) or a disadvantage (a poorly run company can be dissolved, making recovery harder). Check if the company is registered at Companies House and has been trading for at least 2–3 years.
Both types should ideally use a written contract. Our guide on whether you need a contract with a builder applies to both sole traders and companies.
When a Limited Company Is the Better Choice
A limited company may be the better choice when:
- ✓ The project is large (£15,000+) and requires multiple specialist tradespeople managed under one contract
- ✓ You need continuity guarantees — if one worker is unavailable, a company can send another
- ✓ The project involves specialist equipment that typically only larger companies own
- ✓ You are a landlord or managing agent requiring formal contracts, insurance certificates, and compliance documentation
- ✓ The company has specific certifications (e.g., a manufacturer-backed installation scheme) that sole traders typically cannot access
When a Sole Trader Is the Better Choice
A sole trader may be the better choice when:
- ✓ The job is small to medium in size and a single skilled person can complete it
- ✓ The sole trader comes with strong personal recommendations or reviews
- ✓ You want to know exactly who will be on your property — no risk of being handed off to a junior employee
- ✓ Budget is a constraint and the sole trader is not VAT-registered, making their quote genuinely lower
- ✓ The individual has strong trade body credentials (NICEIC, Gas Safe, FMB) that make their qualifications clear regardless of business structure
For a full guide on hiring a builder (which covers both sole traders and companies), see our article on how to hire a builder in the UK. Ready to post your job? Use GetQuickHelp to receive quotes from both sole traders and companies in your area, so you can compare on equal terms.
Frequently Asked Questions
Is a sole trader less reliable than a limited company?+
No — business structure tells you nothing about reliability. A sole trader with 15 years' experience, NICEIC registration, and 50 five-star reviews is far more reliable than a newly formed limited company with no track record. Judge by qualifications, reviews, and references rather than business type.
What is the difference between a sole trader and a self-employed person?+
These terms are often used interchangeably in everyday speech. Self-employed is a tax status; sole trader is a business structure. A person can be self-employed and operate as a sole trader, a partner in a partnership, or through a limited company. For a homeowner, the practical distinction rarely matters — what matters is insurance, qualifications, and reviews.
Do I need to worry about IR35 when hiring a tradesperson?+
No. IR35 (off-payroll working rules) applies to contracts for services where a worker provides services through their own limited company to a client that would otherwise treat them as an employee. For homeowners hiring a tradesperson for a domestic job, IR35 does not apply.
What if a sole trader retires or becomes ill during my project?+
This is a genuine risk for long-running projects. Mitigate it by: using staged payments tied to milestones (so you are not significantly ahead financially if work stops), ensuring any materials on-site are yours, and checking whether the tradesperson has a trusted colleague or subcontractor who could take over in an emergency.
Does Companies House registration prove a company is trustworthy?+
No. Registering a company at Companies House costs £12 and requires no quality checks. A newly incorporated company has no track record. Always check how long the company has been trading, look at reviews, verify professional body membership, and check insurance — regardless of whether they are incorporated.
Is a limited company quote always more expensive?+
Not necessarily. A VAT-registered sole trader and a limited company at the same VAT status will have similar pricing structures. What often makes sole traders cheaper is that more operate below the VAT threshold. Compare final prices inclusive of VAT across all quotes for a true comparison.
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