Thinking about closing your limited company? Perhaps you’re retiring, moving on to something new or simply no longer need your business.
One of the biggest questions we get asked is: “How do I close my company and what happens to the money left in the bank?”
If your company is solvent, meaning it can pay all its debts, there are two main ways to close it:
- Voluntary strike-off through Companies House.
- Members’ Voluntary Liquidation (MVL), using a licensed insolvency practitioner.
The right option often depends on how much money is left in the company and how that money will be taxed.
Let’s explain both options in more detail.
Before You Close Your Limited Company
First, you need to establish exactly what your company owns and owes.
Even if you’ve stopped trading and paid all your suppliers, there may still be other liabilities to consider.
These could include:
- Corporation Tax on your final profits.
- VAT or PAYE still due to HMRC.
- Outstanding director’s loans.
- Loans, leases or other commitments.
- Professional fees for closing the company.
Your accountant can help you prepare the final figures and work out how much money will be available to distribute to shareholders.
And if you’re not quite ready to close the company permanently, you might want to consider making it dormant instead.
We’ve explained that option in our previous blog, What to Do When Your Limited Company Becomes Dormant.
But if you’re definitely ready to close your company, read on!
Option 1: Voluntary Strike-Off – When There’s £25,000 or Less to Distribute
If your company has £25,000 or less to distribute to its shareholders, voluntary strike-off is often the simplest and most cost-effective way to close it.
This means asking Companies House to remove the company from the register using form DS01.
The main advantage is that you don’t need to appoint an insolvency practitioner, so the costs are usually much lower.
How Does Voluntary Strike-Off Work?
Step 1: Stop trading
Your company must normally have stopped trading for at least three months before you apply for strike-off.
During this period, you can still carry out certain activities necessary to wind up the company’s affairs, such as paying outstanding bills and dealing with the closure.
Step 2: Finalise the accounts and tax affairs
Your accountant will help you prepare the final accounts, calculate Corporation Tax and deal with any remaining HMRC obligations.
You’ll also need to close your PAYE scheme and cancel VAT registration where applicable.
Step 3: Distribute the remaining money
Once you’ve established the company’s final liabilities and ensured they can be paid, the remaining funds can be distributed to shareholders.
These distributions must be properly documented and completed before the company is dissolved.
Step 4: Apply for strike-off
The directors submit a DS01 application to Companies House.
A copy must be provided to relevant parties, including shareholders and creditors, within seven days of applying.
Step 5: The company is dissolved
Companies House publishes a notice in The Gazette.
Provided there are no objections, the company will normally be dissolved at least two months after the notice is published.
And that’s it. Your company has officially closed!
What Happens to the £25,000?
This is where things get interesting from a tax perspective.
Under special tax rules, where the total qualifying distributions made in anticipation of the company’s dissolution do not exceed £25,000, those payments can generally be treated as capital rather than dividends.
That means shareholders may pay Capital Gains Tax instead of Income Tax on dividends.
If the shareholder qualifies for Business Asset Disposal Relief, there may be an additional tax advantage.
A few important things to remember:
- The £25,000 limit applies to the company overall, not to each shareholder.
- It covers the total relevant distributions, not simply the last payment made.
- If the total exceeds £25,000, the special capital treatment is lost for those distributions.
- The company must also meet the other conditions for the relief.
What if there’s £30,000 or £40,000 left?
You can still potentially use voluntary strike-off, but you need to consider the tax treatment carefully.
Just because there’s more than £25,000 in the company doesn’t mean you’re legally required to appoint an insolvency practitioner.
However, another option may be more tax-efficient.
Option 2: Members’ Voluntary Liquidation (MVL) – When There’s More Money to Distribute
If your limited company has a substantial amount of cash or other assets remaining, a Members’ Voluntary Liquidation may be the better option.
An MVL is a formal procedure used to close a solvent company.
Although it requires a licensed insolvency practitioner, it can be worthwhile because distributions to shareholders are generally treated as capital rather than dividends.
How Does a Members’ Voluntary Liquidation Work?
Step 1: Prepare the company’s final financial position
Your accountant will help ensure the bookkeeping is up to date, identify outstanding tax liabilities and establish the company’s assets and liabilities.
This provides the information needed for the liquidation.
Step 2: Engage a licensed insolvency practitioner
A licensed insolvency practitioner must be appointed to act as the liquidator.
Despite the name, insolvency practitioners don’t just deal with companies that are in financial trouble!
They also oversee the closure of perfectly solvent businesses.
Your accountant can help you find a suitable practitioner, obtain a quote and liaise with them.
Step 3: Make a declaration of solvency
The directors must formally declare that, having reviewed the company’s financial affairs, they believe it can pay all its debts, together with applicable interest, within 12 months of the start of the liquidation.
The declaration includes a statement of the company’s assets and liabilities.
Step 4: Shareholders approve the liquidation
The shareholders pass a special resolution to wind up the company, within five weeks of the declaration of solvency.
The necessary documents and notices are then filed and published within the statutory deadlines.
Step 5: The liquidator takes over
The liquidator deals with the company’s remaining affairs, settles liabilities and distributes the surplus assets to shareholders.
Depending on the circumstances, shareholders may receive an initial distribution before the liquidation is completed.
Step 6: The company is dissolved
Once the liquidation is finished, the liquidator files the final paperwork with Companies House.
The company is normally dissolved three months after the final return is registered.
What About Capital Gains Tax?
This is often the biggest reason shareholders choose an MVL.
Distributions made during a Members’ Voluntary Liquidation are normally treated as capital.
This means that shareholders are generally subject to Capital Gains Tax rather than dividend tax.
Some shareholders may also qualify for Business Asset Disposal Relief (BADR).
For qualifying disposals from 6 April 2026, the BADR rate is 18%.
However, this relief is not automatic.
For example, the company will generally need to qualify as a trading company, and the shareholder must satisfy certain ownership and other requirements.
Investment companies, such as those principally holding rental properties, will not normally qualify.
It’s therefore really important to review the tax implications before starting the liquidation.
Strike-Off or MVL: Which Should You Choose?
Here’s a quick comparison.
| Voluntary Strike-Off | Members’ Voluntary Liquidation | |
| Usually suitable for | £25,000 or less to distribute | Larger amounts |
| Insolvency practitioner needed? | No | Yes |
| Professional costs | Generally lower | Generally higher |
| Capital Gains Tax treatment | Possible within £25,000 limit | Generally available |
| Business Asset Disposal Relief | Potentially | Potentially |
| Suitable for solvent companies? | Yes | Yes |
There isn’t one solution that’s right for every business.
A company with £35,000 remaining might decide that the additional costs of a formal liquidation outweigh the tax savings.
On the other hand, a company with £200,000 remaining could find that an MVL produces a considerably better outcome.
The important thing is to do the calculations before making a decision.
What If You’re Planning to Start Another Company?
There’s one more thing to be aware of.
HMRC has anti-avoidance rules designed to prevent shareholders from repeatedly closing companies, taking the money out as capital and then carrying on the same or a similar business.
These rules are sometimes referred to as the anti-phoenixing rules.
In certain circumstances, where a shareholder continues a similar business within two years of receiving a liquidation distribution, the payment could be taxed as income rather than capital.
The rules don’t automatically apply simply because you start another business, but they do need to be considered.
If that’s part of your plan, speak to your accountant before proceeding.
How Can DNA Accountants Help You Close Your Limited Company?
At DNA Accountants, we understand that closing a business can feel like a big step.
Perhaps you’ve spent years building your company and are now looking forward to retirement.
Or perhaps your circumstances have changed and you’re ready for a new chapter.
Whatever the reason, we’ll help make the process as straightforward as possible.
We can help you:
- Review your company’s final financial position.
- Calculate outstanding Corporation Tax and other liabilities.
- Explain the difference between voluntary strike-off and an MVL.
- Compare the tax implications of each option.
- Prepare final accounts and tax returns.
- Liaise with an insolvency practitioner where appropriate.
- Guide you through the closure process.
Thinking about closing your limited company?
Before you make any decisions, get in touch with DNA Accountants.
We’ll help you understand your options and work out the most appropriate and tax-efficient way to close your company.
And if you’re still undecided about closing altogether, don’t forget to read our guide to making your limited company dormant.
This article provides general guidance based on UK rules as at October 2026. The tax treatment will depend on individual circumstances, and professional advice should be obtained before proceeding.