How to Close a Limited Company in the UK

Closing a limited company in the UK is not as simple as stopping trading and walking away. The right method depends on whether your company is solvent, how much money is left in it and whether it still owes anything to HMRC or other creditors. This guide explains the three main options, voluntary strike-off, a members’ voluntary liquidation (MVL) and a creditors’ voluntary liquidation (CVL), so you can choose the right route for your situation.

• Should you close the company or make it dormant?
• The main ways to close a limited company
• Voluntary strike-off (DS01)
• Members’ voluntary liquidation (MVL)
• Creditors’ voluntary liquidation (CVL)
• What to do before you close
• Tax implications of closing a limited company
• Frequently asked questions

Should you close the company or make it dormant?

Before you start, consider whether closing is the right move. If you might trade again, making the company dormant is simpler. A dormant company still files annual accounts and a confirmation statement with Companies House, and you need to tell HMRC it is dormant for Corporation Tax, but there is no trading, VAT or payroll to manage.

If you are sure you will not trade again, or you want to take out the remaining funds and move on, closure is the right path. The most common reasons directors close a company are retirement and a change in how they work, for example returning to employment or becoming a sole trader.

The main ways to close a limited company

There are three main routes, and your circumstances decide which one applies.

• Voluntary strike-off: for solvent companies with little left in them, usually where the final distribution to shareholders is £25,000 or less.
• Members’ voluntary liquidation (MVL): for solvent companies with larger retained profits or assets.
• Creditors’ voluntary liquidation (CVL): for insolvent companies that cannot pay their debts.

If your company is insolvent, stop and speak to a licensed insolvency practitioner before you take any other step. Continuing to trade while insolvent can make you personally liable for company debts and can lead to director disqualification.

Voluntary strike-off (DS01)

Voluntary strike-off is usually the cheapest way to close a solvent company. You apply to Companies House using form DS01 and pay a fee of £13 online or £18 on paper. Companies House then advertises the application, and if nobody objects, the company is dissolved.

Who can use voluntary strike-off?

You can apply if your company:

• Has not traded or sold off any stock in the last three months
• Has not changed its name in the last three months
• Is not threatened with liquidation or subject to insolvency proceedings
• Has no agreements with creditors, such as a Company Voluntary Arrangement

In practice, you should also settle the company’s debts first, because any creditor, including HMRC, can object to the strike-off. If your company has employees, close payroll and issue P45s before you apply. If the company is VAT registered, submit a final VAT return and cancel the registration.

The strike-off process step by step

1. Settle all debts, including Corporation Tax, VAT and PAYE.
2. File any outstanding annual accounts and Corporation Tax returns.
3. Distribute the remaining funds to shareholders and close the company bank account.
4. Send a copy of your application to shareholders, creditors, employees and anyone else with an interest in the company.
5. Submit form DS01 to Companies House.
6. Companies House publishes a notice in The Gazette. If no valid objections are received within two months, the company is struck off the register.

The £25,000 distribution limit

This is where many directors get caught out. If the company distributes £25,000 or less to shareholders in anticipation of a strike-off, the distribution is treated as capital and Capital Gains Tax applies. If the distribution is more than £25,000, the whole amount is treated as income and taxed at dividend rates: 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band in 2026/27.

If your company holds more than £25,000, an MVL is often more tax efficient. Speak to an accountant before you decide.

Members’ voluntary liquidation (MVL)

An MVL is a formal liquidation of a solvent company. It is used when the company is solvent but the shareholders want to close it and take out retained profits as capital.

Why use an MVL instead of strike-off?

The main reason is tax. Distributions made by a liquidator are normally treated as capital, so shareholders pay Capital Gains Tax on the amount received above what they paid for their shares, rather than dividend tax.

In 2026/27, each individual has a £3,000 annual exempt amount for Capital Gains Tax. Gains above that are taxed at 18% within the basic rate band and 24% above it. If you qualify for Business Asset Disposal Relief, the rate is 18% on qualifying gains up to a £1 million lifetime limit. For a director with large retained profits who would otherwise pay dividend tax at 35.75% or 39.35%, the difference can be significant.

How does an MVL work?

1. The directors make a declaration of solvency, confirming the company can pay its debts in full within 12 months.
2. Shareholders pass a special resolution to wind up the company, which needs 75% of the votes.
3. A licensed insolvency practitioner is appointed as liquidator.
4. The liquidator collects the assets, settles any remaining liabilities and distributes the remaining funds to shareholders.
5. The liquidator completes the final steps and the company is dissolved.

An MVL costs more than a strike-off, because you pay for a licensed insolvency practitioner. Fees depend on the complexity of the company, so ask for a fixed quote and compare it with the tax you expect to save.

Does Business Asset Disposal Relief always apply?

Not automatically. To qualify on an MVL, you generally need to have been an officer or employee of the company and held at least 5% of the shares and voting rights for at least two years before the winding up. HMRC also has anti-avoidance rules for liquidations. If you carry on a similar trade or activity within two years of receiving a distribution from the liquidation, the distribution can be taxed as income instead. Take proper tax advice before you proceed.

Creditors’ voluntary liquidation (CVL)

A CVL applies when a company is insolvent, meaning it cannot pay its debts as they fall due or its liabilities are greater than its assets. It is a formal insolvency process designed to treat creditors fairly, not a tax planning tool.

In a CVL, the shareholders vote to wind up and an insolvency practitioner takes over as liquidator. The liquidator takes control of the company’s assets, reports on the directors’ conduct, pays creditors in the order set by law and dissolves the company at the end of the process.

If there are not enough assets to cover the debts, most creditors receive less than they are owed. As a director, your personal liability is generally limited unless you have given personal guarantees or the liquidator finds evidence of wrongful or fraudulent trading.

A CVL is not something to manage without professional help. Get that help as soon as you know the company is insolvent.

What to do before you close

Whichever route you take, there is a checklist to complete before the company is dissolved.

HMRC obligations

• File all outstanding Corporation Tax returns and pay any tax due.
• Deregister for VAT, if registered, and file the last VAT return.
• Close your PAYE scheme and send final payroll figures to HMRC.
• If your company is registered for CIS, submit any outstanding CIS returns and tell HMRC you are closing.

Companies House obligations

• File final annual accounts up to the date trading stopped.
• Keep the confirmation statement up to date until the company is dissolved.

Bank and contracts

• Cancel direct debits, subscriptions and standing orders.
• Close the company bank account once all payments are made.
• Cancel or transfer any leases, licences or contracts in the company’s name.
• Keep the company’s records after dissolution, because HMRC can still ask questions once the company has gone.

Employees

If you have staff, you must give proper notice, pay outstanding wages and holiday pay, issue P45s and consider your obligations under TUPE if the business is being transferred rather than wound down. The same rules apply to directors who are also employees.

Tax implications of closing a limited company

The tax position at closure depends on what is left in the company and how you take it out.

Retained profits

Retained profits have already had Corporation Tax paid on them. When you take them out, the tax treatment depends on the closure method:

• Strike-off with a distribution of £25,000 or less: treated as capital. Capital Gains Tax applies after your £3,000 annual exempt amount in 2026/27.
• Strike-off above £25,000: dividend tax on the full amount, at the rates shown earlier.
• MVL: distributions are normally treated as capital, and Business Asset Disposal Relief may give a rate of 18% if you qualify, subject to the anti-avoidance rules above.

Goodwill and assets

If the company holds assets such as equipment, intellectual property or goodwill, they need to be sold or distributed before or during closure. A sale or transfer at a gain is subject to Corporation Tax before the company is dissolved, so get professional valuations for anything significant.

Director’s loan accounts

If you owe the company money through a director’s loan account, you need to repay it or deal with it before the company closes. If the company owes you money, it can repay that balance before any distribution to shareholders.

Your personal tax return

Any income or capital gains from the closure must be declared on your personal Self Assessment tax return. If you are claiming Business Asset Disposal Relief, you claim it on your return.

Up-to-date bookkeeping to the date of closure makes the process smoother and reduces the risk of errors.

Closing a limited company takes time and attention to detail. Getting the steps in the right order, and taking tax advice before you distribute funds, can save you money and prevent problems with HMRC later. If you are unsure which route suits your company, NDCA can compare the options with you.

Frequently asked questions

How long does it take to close a limited company in the UK?

A voluntary strike-off usually takes around three months from the date you submit form DS01, including the two-month objection period. An MVL often takes several months, depending on the company’s affairs. A CVL can take longer, sometimes more than a year, if the liquidator needs to investigate or recover assets.

Can I close a limited company that has debts?

If the company is insolvent and cannot pay its debts, you cannot use voluntary strike-off or an MVL. You will need a creditors’ voluntary liquidation or, in some cases, a compulsory liquidation started by a creditor. An insolvency practitioner runs either process and can advise on your position as a director.

Do I need an accountant to close a limited company?

You are not legally required to use an accountant for a straightforward strike-off, but it is sensible. An accountant can make sure the tax position is settled, the final accounts are filed correctly and funds are distributed in the right way. For an MVL or a CVL, you must use a licensed insolvency practitioner.

What happens if I stop filing and abandon the company?

Companies House will eventually strike the company off for failing to file, but this is not a clean closure. HMRC can still pursue unpaid taxes, and any assets left in the company at dissolution pass to the Crown as bona vacantia. Abandoning a company can also affect your ability to act as a director in future.

Can I reuse the company name after closing it?

Once a company is dissolved, its name can in principle be registered again. If you were a director of a company that went into insolvent liquidation, there are restrictions on using the same or a similar name for a new company for five years, known as the phoenix company rules.

What is the difference between dissolving and liquidating a company?

Dissolution is the end result, the point at which the company is removed from the Companies House register. Liquidation is a formal process, an MVL or a CVL, that leads to dissolution. Voluntary strike-off skips the liquidation stage and goes straight to dissolution, which is why it only suits a company with few assets and no outstanding liabilities.