Most new UK founders start as a sole trader because it takes minutes to register with HMRC and there is very little ongoing admin. You keep it simple, report profits on a Self Assessment, and pay income tax and National Insurance on what you earn.
A limited company is a separate legal entity. That separation protects your personal assets if things go wrong, and once profits grow it usually becomes the more tax-efficient structure because you can take a small salary plus dividends.
The trade-off is paperwork: annual accounts, a confirmation statement, a corporation tax return, and public director details at Companies House. If you expect to work with larger clients or raise investment, that extra admin is normally worth it.
A practical rule of thumb: stay a sole trader while you are testing the idea and profits are modest, then incorporate once profits are consistently above roughly £30,000 a year or you take on real liability.
