You've built a jewellery business that works, and now you're wondering whether to keep trading in your own name or set up a limited company. It's a fair question, and the honest answer is that it depends on your numbers, your risk, and your plans.
This guide walks you through the real differences for a jeweller in 2025/26: the tax, the liability, the admin, and the gold and second-hand quirks that catch our jewellery clients out. We'll run an illustrative worked example so you can see the maths, not just the theory.
It's written for working jewellers, bench jewellers, retailers, watch dealers and gold buyers who want a clear, practical steer before they commit.
Should a jeweller be a sole trader or a limited company?
There's no universal answer. As a rough guide, a sole trader set-up is simpler and often cheaper to run while profits are modest, while a limited company adds limited liability, a more flexible way to pay yourself, and a more credible front for trade suppliers and bullion dealers once profits and risk grow.
The structure that wins on tax in 2025/26 is not always the company, so it pays to run your own numbers before you incorporate.
What's the difference between the two structures?
As a sole trader, you and the business are the same legal person. You keep business records, register for Self Assessment, and pay Income Tax and National Insurance on your profits. The flip side is unlimited liability: as gov.uk puts it, "You are personally responsible for all of the debts of the business."
A limited company is, in gov.uk's words, "legally separate from the people who own it, and is run by one or more directors." You register it at Companies House, file annual accounts and a confirmation statement, and the company pays Corporation Tax on its profits. Owners are "responsible for the debts of the business only up to the value of their financial investment", which is the limited liability that gives the structure its name.
A few practical differences matter day to day for a jeweller:
- Privacy. A company's accounts and details are filed at Companies House and are publicly searchable. Your sole trader figures stay between you and HMRC.
- How you get paid. A sole trader simply draws profits. A director typically takes a mix of salary and dividends, which needs a bit more planning and bookkeeping.
- Set-up and admin. A sole trader registers for Self Assessment if turnover is over £1,000. A company has to be incorporated (the digital incorporation fee is £100 from 1 February 2026), file accounts and a Corporation Tax return, and pay the confirmation statement fee (£50 online from 1 February 2026).
For a deeper dive into the day-to-day accounting either way, see our hub for accountants for jewellers.
How is each structure taxed in 2025/26?
This is where the decision usually turns. The two routes are taxed on completely different systems.
A sole trader pays Income Tax and Class 4 National Insurance on business profits through Self Assessment. For 2025/26 the figures are:
| Income Tax / NIC item | 2025/26 figure |
|---|---|
| Personal Allowance | £12,570 |
| Basic rate (band of £37,700 above the allowance) | 20% |
| Higher rate (income £50,271 to £125,140) | 40% |
| Class 4 NIC main rate (£12,570 to £50,270) | 6% |
| Class 4 NIC additional rate (above £50,270) | 2% |
A limited company pays Corporation Tax on its profits first, and then you pay personal tax on whatever you take out as salary or dividends. For Financial Year 2025:
| Corporation Tax / dividend item | 2025/26 figure |
|---|---|
| Small profits rate (profits up to £50,000) | 19% |
| Main rate (profits over £250,000) | 25% |
| Marginal relief (profits £50,000 to £250,000) | 25% less relief at 3/200 |
| Dividend allowance | £500 |
| Dividend ordinary rate | 8.75% |
| Dividend upper rate | 33.75% |
Two things often surprise jewellers who incorporate. First, where company profit lands between £50,000 and £250,000, you don't get the flat 19% rate. You pay the 25% main rate with marginal relief, so the effective rate creeps up. Second, employer's National Insurance is now charged at 15% on salary above the £5,000 secondary threshold for 2025/26, and a company whose only employee is its sole director generally cannot claim the Employment Allowance to offset it.
Worked example: a jeweller making £80,000 profit
Illustrative example. Aisha runs a jewellery workshop and retail bench in England and Wales. Her business makes a profit of £80,000 in 2025/26 before any tax. She wants to take the lot out to live on. Here's how the two routes compare. Figures are rounded to the nearest pound.
As a sole trader
- Income Tax: nothing on the first £12,570, then £37,700 at 20% (£7,540), then the remaining £29,730 at 40% (£11,892). Total Income Tax: £19,432.
- Class 4 NIC: £37,700 at 6% (£2,262) plus £29,730 at 2% (£595). Total Class 4: £2,857.
- Total tax and NIC: £22,289. Take-home: £57,711.
As a limited company (director's salary of £12,570, the rest taken as dividends)
- Employer's NIC on the salary: (£12,570 less £5,000) at 15% = £1,136.
- Taxable company profit: £80,000 less £12,570 salary less £1,136 employer's NIC = £66,295. This sits in the marginal relief band, so Corporation Tax is £66,295 at 25% (£16,574) less marginal relief of (£250,000 less £66,295) at 3/200 (£2,756) = £13,818.
- Profit left for dividends: £66,295 less £13,818 = £52,477.
- Dividend tax: the £12,570 salary uses the Personal Allowance, so the £500 dividend allowance and then £37,200 of dividends fall in the basic band at 8.75% (£3,255), and the remaining £14,777 falls in the higher band at 33.75% (£4,987). Total dividend tax: £8,242.
- Total tax and NIC (employer's NIC + Corporation Tax + dividend tax): £23,196. Take-home: £56,804.
| At £80,000 profit, 2025/26 | Sole trader | Limited company |
|---|---|---|
| Income Tax | £19,432 | nil (salary covered by allowance) |
| National Insurance | £2,857 (Class 4) | £1,136 (employer's) |
| Corporation Tax | n/a | £13,818 |
| Dividend tax | n/a | £8,242 |
| Total tax and NIC | £22,289 | £23,196 |
| Take-home | £57,711 | £56,804 |
At this profit level, and on these assumptions, the sole trader is actually about £900 a year better off once the 15% employer's NIC and the marginal relief band are taken into account. The company catches up and can pull ahead at higher profits, where you can retain money in the business rather than drawing it all, or where you genuinely value limited liability. The lesson is that the "company saves tax" rule of thumb does not hold automatically in 2025/26. You can sense-check your own position with our income tax calculator and dividend tax calculator.
Does limited liability matter for a jewellery business?
For many jewellers, this is the deciding factor, not the tax. A bench jeweller carrying high-value consignment stock, a retailer holding a safe full of customer repairs, or a dealer buying bullion on credit all carry real financial exposure.
If the business hits trouble as a sole trader, your personal assets are on the line, because the debts are legally yours. A limited company ring-fences that risk to what you've put into the company, subject to the usual exceptions such as personal guarantees you sign for a lease or a finance agreement, and any wrongful trading.
If you hold a lot of other people's property or other people's money, that protection can be worth more than a few hundred pounds of tax either way.
Do the gold and VAT rules change the decision?
Your VAT position is mostly driven by what you sell and how, not by whether you're a sole trader or a company. The VAT registration threshold is £90,000 of taxable turnover, and it applies to the business whichever structure you use. But two jewellery-specific schemes are worth understanding before you commit, because they shape your cash flow.
The VAT margin scheme for second-hand jewellery
If you buy second-hand jewellery or watches from private individuals (who can't charge you VAT), the VAT margin scheme lets you account for VAT only on your margin, not the full selling price. As HMRC explains, the scheme lets you "calculate VAT on the value you add to the goods you sell, rather than on the full selling price". You work out the margin, then the VAT due is the margin multiplied by 1, then divided by 6 (the 1/6 fraction at the 20% standard rate).
Important exclusions for jewellers: you cannot use the margin scheme for "investment gold", "precious metals" or "precious stones", and you cannot use it for anything you bought on an invoice that showed VAT separately. Collectors' gold coins of genuine numismatic interest can qualify, but investment gold coins cannot. This applies the same way whether you trade as a sole trader or a company.
Investment gold and the special accounting scheme
Investment gold is treated very differently. For VAT, investment gold is gold "of a purity not less than 995 thousandths that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets", plus qualifying gold coins minted after 1800 of at least 900 thousandths purity that are or have been legal tender and normally sell at no more than 180% of the open market value of their gold content.
Supplies of investment gold are exempt from VAT by default, although a producer or transformer can opt to tax supplies to another taxable person. There's also the Special Accounting Scheme for gold, a domestic reverse charge between VAT-registered businesses, where the buyer rather than the seller accounts for the output tax. Again, none of this changes with your business structure, but it does mean your bookkeeping needs to be right from day one. We cover the mechanics in our guide to accounting for jewellers.
What about money laundering registration?
This one catches a lot of new jewellery businesses, and it has nothing to do with whether you're a company or a sole trader.
If you accept or make high value cash payments of 10,000 euros or more (or the equivalent in any currency), in a single transaction or in linked transactions, you're a high value dealer and you must register for money laundering supervision with HMRC. This bites on jewellery specifically, because precious items "can be easily transferred and sold on". The threshold also covers payments that look like they've been deliberately broken into smaller amounts to slip under the limit.
So whichever structure you choose, build cash-handling controls and record-keeping in from the start.
How does buying tools and equipment compare?
Both structures can claim capital allowances on the kit a jeweller needs, from laser welders and rolling mills to safes and display cabinets. The Annual Investment Allowance lets you deduct 100% of qualifying plant and machinery spending, up to £1,000,000 a year, against your profits.
The practical difference is the rate at which that relief saves tax. A higher-rate sole trader saves Income Tax at 40% plus a slice of National Insurance on the deduction, while a company saves Corporation Tax at its effective rate (19% to 25% depending on profit). Neither is automatically better, it depends on your profit level and how you take money out. For companies, full expensing also gives a 100% first-year allowance on new main-rate plant and machinery.
When should a jeweller switch to a limited company?
There's no single trigger, but in practice the case for a company strengthens when:
- Your profits are comfortably into higher-rate territory and you can leave some money in the business rather than drawing it all.
- You're carrying real financial risk, such as high-value consignment stock, customer goods, or bullion bought on credit, and you want limited liability.
- Trade suppliers, bullion dealers or landlords expect to deal with a company.
- You're planning to bring in a co-owner, raise investment, or eventually sell the business.
The case for staying a sole trader holds when profits are modest, you value simplicity and privacy, and you don't carry much external risk. Many jewellers start as sole traders and incorporate later, once the numbers and the risk justify the extra admin.
If you'd like a clear, jewellery-specific recommendation based on your actual figures, that's exactly the kind of thing we do for our jewellery clients.
Talk it through with Zmartly. Book a free 20-minute call and we'll model the sole trader and limited company routes on your real numbers, factor in the gold and VAT quirks, and tell you which structure leaves you better off. Visit Zmartly's page for jewellers to get started.
Frequently asked questions
Is a limited company always more tax-efficient for a jeweller?
No. In 2025/26, the 15% employer's National Insurance on a director's salary and the Corporation Tax marginal relief band (25% with relief between £50,000 and £250,000 of profit) can wipe out the saving, especially if you draw all the profit. As our illustrative example shows, a sole trader can be slightly better off at £80,000 of profit. Run your own numbers before deciding.
Can I use the VAT margin scheme as a sole trader jeweller?
Yes. The VAT margin scheme is available whether you trade as a sole trader or a limited company. It lets you account for VAT on your margin when you sell eligible second-hand jewellery or watches bought from private individuals. You cannot use it for investment gold, precious metals or precious stones, or for anything bought on a VAT invoice that charged VAT.
Do I need to register as a high value dealer?
If your jewellery business accepts or makes cash payments of 10,000 euros or more (or the equivalent in any currency), as a single transaction or linked transactions, you must register for money laundering supervision with HMRC as a high value dealer. This applies to both sole traders and companies.
Are my jewellery business accounts public if I incorporate?
A limited company files accounts and a confirmation statement at Companies House, and those details are publicly searchable. A sole trader's figures are not published, they go only to HMRC through Self Assessment. If privacy matters to you, that's a point in favour of staying a sole trader.
What does it cost to set up and run a limited company?
You pay Companies House to incorporate the company (the digital incorporation fee is £100 from 1 February 2026) and an annual confirmation statement fee (£50 online from 1 February 2026), plus the cost of preparing annual accounts and a Corporation Tax return. A sole trader has no incorporation cost and only needs to file a Self Assessment return.
