How to Close a Limited Company in the UK (MVL, Strike-Off & Costs)
- A solvent company can be closed by strike-off (form DS01) or a Members' Voluntary Liquidation (MVL).
- Strike-off is cheapest: £13 online or £18 by post, and takes around 2–3 months.
- The key tax split is the £25,000 rule — on a strike-off, distributions above £25,000 are taxed as income (dividends).
- An MVL treats all distributions as capital regardless of amount, which usually wins for larger cash piles, often with Business Asset Disposal Relief at 18%.
- MVLs need a licensed insolvency practitioner and typically cost £1,500–£5,000+.
- If the company can't pay its debts, you need a Creditors' Voluntary Liquidation instead — not a strike-off.
Closing a limited company properly matters just as much as setting one up. Do it the wrong way and you can leave debts unpaid, hand cash to the Crown, or pay income tax on money that could have been taxed as capital at a far lower rate. This guide walks through every route to close a UK company, what you must do first, exactly what each option costs, and — crucially — the £25,000 tax rule that decides which one saves you the most.
What are the ways to close a limited company?
The right method depends first on one question: can the company pay everything it owes?
| Situation | How to close it |
|---|---|
| Solvent, small amounts to distribute | Strike-off (DS01) — the cheapest, simplest route |
| Solvent, larger reserves to distribute | Members' Voluntary Liquidation (MVL) — tax-efficient for bigger sums |
| Insolvent (can't pay its debts) | Creditors' Voluntary Liquidation (CVL) or administration |
For most small, solvent limited companies that have stopped trading, the choice is simply strike-off versus MVL — and that decision comes down to how much money is left in the business.
What must you do before closing your company?
Whichever route you take, you must tidy up the company's affairs first. Skipping these steps is how people end up with penalties, or with HMRC objecting to the closure:
- Prepare final statutory accounts and a Company Tax Return, and tell HMRC they're the final ones
- Pay any outstanding Corporation Tax and other liabilities
- Close down PAYE and settle any final payroll if you have employees
- Deregister for VAT if the company is registered — see our guide to how to deregister for VAT
- Distribute any remaining assets to shareholders before the company is closed
⚠️ Empty the bank account first. Any money or assets still in the company when it's struck off pass to the Crown under bona vacantia — literally "ownerless goods." Once it's gone, getting it back is difficult and expensive, so always distribute cash to shareholders before you close.
How do you close a company with a strike-off (DS01)?
A voluntary strike-off (also called dissolution) removes the company from the Companies House register so it legally ceases to exist. You apply on form DS01, and it's the cheapest way to close a solvent company:
- £13 if you apply online
- £18 if you apply by post
You can only use this route if, in the last 3 months, the company has not traded or sold off stock, and has not changed its name — and it must not be threatened with liquidation or have any agreements with creditors such as a Company Voluntary Arrangement. Within 7 days of applying, you must send a copy of the DS01 to anyone with an interest — other shareholders, creditors, employees and any directors who didn't sign.
Companies House then publishes a notice in the Gazette. If nobody objects, the company is usually struck off around 2 to 3 months later. Creditors or HMRC can object — most often when tax or a debt is outstanding — which is exactly why you clear everything first.
What is a Members' Voluntary Liquidation (MVL)?
An MVL is a formal way to wind up a solvent company — one that can pay all its debts — usually when there are significant reserves to hand back to shareholders. It has to be handled by a licensed insolvency practitioner, who realises the assets, settles any liabilities, and distributes the balance to shareholders.
That professional involvement is why an MVL costs more — typically £1,500 to £5,000 or more in practitioner fees. In return, you get the big advantage: every distribution is treated as capital, not income, however large it is. For a company sitting on tens or hundreds of thousands of pounds, that tax treatment can save far more than the fee.
Strike-off or MVL: which should you choose?
This is where the money is, and it hinges on the £25,000 rule:
| Amount to distribute | Best route & tax treatment |
|---|---|
| £25,000 or less | Strike-off. The distribution can be treated as capital (subject to CGT, often with reliefs), which is usually cheaper than dividend tax |
| More than £25,000 | On a strike-off the whole amount is taxed as income (dividends). An MVL keeps it all as capital — usually the tax-efficient choice |
Capital treatment matters because it can unlock Business Asset Disposal Relief (BADR), which charges Capital Gains Tax at just 18% for 2026/27 on qualifying gains, up to a £1 million lifetime limit. To qualify you generally need to have held at least 5% of the shares and been an officer or employee for at least 24 months. Compared with dividend tax at up to 39.35%, the saving on a large distribution is substantial — which is exactly why MVLs exist. If you're weighing dividends in the meantime, our guide to dividend tax in the UK shows the rates.
⚠️ Watch the anti-avoidance rule (TAAR). If you take capital treatment through an MVL and then start a similar trade or activity within 2 years, HMRC's Targeted Anti-Avoidance Rule can re-tax the whole distribution as income. Closing a company to reopen a near-identical one is exactly what it's designed to catch.
What if the company is insolvent?
If the company can't pay its debts, you must not simply strike it off — creditors will object, and directors who ignore their interests can face personal liability or disqualification. The right route is a Creditors' Voluntary Liquidation (CVL), again handled by a licensed insolvency practitioner, who sells the assets and distributes the proceeds to creditors in the legal order of priority.
If you're not sure whether the company is solvent, that's the point to get advice quickly — acting early protects you as a director and usually leads to a cleaner outcome.
Frequently asked questions
How much does it cost to close a limited company?
A voluntary strike-off using form DS01 costs £13 online or £18 by post. A Members' Voluntary Liquidation costs more — typically £1,500 to £5,000 or more in insolvency practitioner fees — but can save far more in tax when there is a large sum to distribute.
What is the £25,000 rule when closing a company?
On a strike-off, distributions to shareholders can be treated as capital only up to £25,000. If the total is more than £25,000, the whole amount is taxed as income (dividends). A Members' Voluntary Liquidation treats all distributions as capital regardless of the amount, which is why it is used for larger sums.
How long does it take to strike off a company?
Once you file form DS01, Companies House publishes a notice in the Gazette. If nobody objects, the company is usually struck off around 2 to 3 months later. Outstanding tax or debts can trigger an objection and delay or stop the process.
Can I strike off a company that owes money?
No. Strike-off is only for solvent companies with no significant debts, and you cannot use it if the company is threatened with liquidation or has an arrangement with creditors. If the company cannot pay its debts, you need a Creditors' Voluntary Liquidation instead.
What happens to money left in the company when it closes?
Any cash or assets remaining when the company is struck off pass to the Crown under bona vacantia and are very hard to recover. You should distribute all remaining funds to shareholders before the company is dissolved.
We'll tell you whether a strike-off or an MVL saves you more, prepare your final accounts and tax return, and handle the filings from start to finish. Fixed fee, no jargon. Get a quote or message us today.
Related: our limited company services, our guide to deregistering for VAT, and dividend tax in the UK. Official guidance is on the gov.uk closing a limited company pages.