What's the difference between being a sole trader and setting up a limited company?

As a sole trader, you and the business are legally the same entity, you keep all the profits after tax, and admin is simpler, but you're personally liable for any business debts. A limited company is a separate legal entity offering liability protection and can be more tax-efficient at higher profit levels through a mix of salary and dividends, but comes with more admin, Companies House filings, and less privacy. Which is better depends heavily on your profit level, risk exposure and future plans, so it's genuinely worth a conversation with an accountant before you register either way.