Running a Limited Company in the UK: Setup, Tax and Director EssentialsHow to Close a Limited Company UK — Striking Off, MVL & Dissolution
How to close a limited company in the UK, including striking off, Members' Voluntary Liquidation, informal winding down, tax implications, and the steps involved.
If you are deciding whether to incorporate, how to pay yourself, and how to stay compliant as a director, start with the Limited Company Hub.
Whether you’re retiring, changing structure, or simply finished trading — here’s how to close your limited company properly.
Options for Closing a Company
| Method | Best for | Cost | Time |
|---|
| Voluntary striking off (DS01) | No debts, assets under £25,000, not traded for 3 months | £10 | 3–6 months |
| Members’ Voluntary Liquidation (MVL) | Solvent company with assets over £25,000 | £2,000–£6,000+ | 3–12 months |
| Informal wind-down | Gradually cease trading, pay debts, extract funds as dividends | Low | Varies |
| Creditors’ Voluntary Liquidation (CVL) | Company can’t pay its debts | £3,000–£7,000 | 6–18 months |
| Make company dormant | Want to keep the company but stop trading | Free (just file dormant accounts) | Ongoing |
Voluntary Striking Off (Dissolution)
When to Use It
| Suitable | NOT suitable |
|---|
| Company has no debts | Company has outstanding debts |
| Company has not traded in the last 3 months | Company is still trading |
| Assets are under £25,000 | Assets over £25,000 (use MVL instead) |
| No pending legal action | Company is subject to legal proceedings |
| Not currently being wound up | Already in formal insolvency process |
Steps
| Step | Action |
|---|
| 1 | Stop trading — cease all business activities |
| 2 | Settle all debts — pay creditors, HMRC, employees |
| 3 | File any outstanding accounts and tax returns |
| 4 | Distribute remaining assets to shareholders (up to £25,000 = capital distribution) |
| 5 | Close the business bank account |
| 6 | Submit DS01 form to Companies House (£10 fee) |
| 7 | Notify within 7 days all interested parties: HMRC, employees, shareholders, creditors, pension providers |
| 8 | Companies House publishes notice in The Gazette |
| 9 | 2-month waiting period for objections |
| 10 | If no objections, company is struck off and dissolved |
Tax on Final Distribution (Striking Off)
| Distribution amount | Tax treatment |
|---|
| Up to £25,000 | Treated as capital — taxed at CGT rates (10% or 20%) |
| Over £25,000 | Excess treated as dividend income — taxed at up to 39.35% |
| With Business Asset Disposal Relief | 10% CGT rate on qualifying gains (lifetime limit £1 million) |
Members’ Voluntary Liquidation (MVL)
When to Use It
| Situation | Why MVL |
|---|
| Company has more than £25,000 in assets | Distributions taxed at 10% CGT (with BADR) rather than dividend rates |
| Significant retained profits | £50,000+ of retained profits makes the tax saving meaningful |
| Director retiring or closing down | Clean, formal process to wind up affairs |
| Multiple shareholders | Professional distribution ensures fairness |
How It Works
| Step | Action |
|---|
| 1 | Directors make a Declaration of Solvency (company can pay all debts within 12 months) |
| 2 | Shareholders pass a special resolution to wind up the company |
| 3 | Appoint a licensed insolvency practitioner as liquidator |
| 4 | Liquidator takes control of the company |
| 5 | All debts are paid |
| 6 | Remaining assets distributed to shareholders as capital |
| 7 | Liquidator applies to Companies House for dissolution |
| 8 | Company is struck off |
MVL Costs
| Item | Typical cost |
|---|
| Insolvency practitioner fee | £2,000–£6,000+ (depends on complexity) |
| Final accounts preparation | £500–£1,500 (your accountant) |
| Companies House filing | Included in IP costs |
| Statutory advertising | Included in IP costs |
Tax Savings — MVL vs Striking Off vs Dividends
| Retained profits | Dividend tax (higher rate) | Capital gains (with BADR) | Tax saving with MVL |
|---|
| £25,000 | ~£8,400 | ~£2,500 | ~£5,900 |
| £50,000 | ~£17,000 | ~£5,000 | ~£12,000 |
| £100,000 | ~£34,000 | ~£10,000 | ~£24,000 |
| £200,000 | ~£68,000 | ~£20,000 | ~£48,000 |
Illustrative — assumes higher-rate taxpayer, BADR at 10%, annual CGT exemption used elsewhere. Actual savings depend on individual circumstances.
Business Asset Disposal Relief (BADR)
| Feature | Detail |
|---|
| What it does | Reduces CGT to 10% on qualifying disposals (up to £1 million lifetime) |
| Qualifying conditions | You must: be an officer or employee, hold at least 5% of shares and 5% of voting rights, have held them for at least 2 years before distribution |
| Lifetime limit | £1 million of qualifying gains |
| How to claim | Via your Self Assessment tax return for the year of distribution |
Checklist Before Closing
| Item | Detail |
|---|
| File all outstanding accounts | Annual accounts up to date with Companies House |
| File all corporation tax returns | All CT600s filed with HMRC |
| Pay all corporation tax | Including tax on final year profits |
| File final VAT return | And deregister for VAT |
| Settle all debts | Creditors, loans, HMRC |
| Final payroll | Pay final salaries, file final FPS and EPS |
| P45s issued | To all employees (including yourself) |
| PAYE scheme closed | Notify HMRC |
| Cancel business insurance | Or transfer |
| Close business bank account | After all transactions are settled |
| Notify HMRC | Corporate tax, VAT, PAYE |
| Notify Companies House | DS01 or MVL |
| Keep records | 6 years after the company is dissolved |
Common Mistakes
| Mistake | Consequence |
|---|
| Distributing more than £25,000 without an MVL | Excess taxed as dividends, not capital gains |
| Not filing final accounts/tax returns | HMRC penalties, Companies House penalties, objection to striking off |
| Not paying outstanding HMRC debts | HMRC can object to striking off |
| Not informing all interested parties within 7 days | Fine of up to £5,000 per offence |
| Making false Declaration of Solvency | Criminal offence — if debts can’t actually be paid |
| Not claiming BADR | Missing out on 10% CGT rate |
| Forgetting to deregister for VAT | Continued VAT obligations |
| Not keeping records after dissolution | HMRC can still enquire for several years |
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