How to Close a UK Limited Company — Strike Off vs Voluntary Liquidation (2026)

Four Ways to Close a UK Ltd

1. Striking Off (DS01) — For dormant or inactive companies with no debts 2. Members' Voluntary Liquidation (MVL) — For solvent companies with assets to distribute 3. Creditors' Voluntary Liquidation (CVL) — For insolvent companies (directors choose liquidation) 4. Compulsory Liquidation — Court-ordered (creditor petitions)

This article covers 1 and 2 — the routes most founders need.

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Option 1: Striking Off (DS01)

When to use: Company is no longer trading, has no debts, no pending court actions, no HMRC obligations open, no assets to distribute to shareholders.

Steps: 1. Pay all debts (suppliers, HMRC, employees) 2. Close all bank accounts 3. De-register for VAT (if registered) — file final VAT return 4. File final CT600 with HMRC 5. Ensure no pending Companies House filings are overdue 6. File DS01 (Striking Off Application) at Companies House — £8 fee — signed by a director 7. Notify all interested parties within 7 days (banks, HMRC, employees, creditors, shareholders) 8. Companies House publishes a notice in the Gazette — 3-month objection period 9. If no objections: company is struck off and dissolved

Timeline: 3–5 months from DS01 filing to dissolution.

IMPORTANT: Any assets in the company at the time of dissolution automatically become bona vacantia — they pass to the Crown (UK government). This includes bank account balances. Close bank accounts BEFORE filing DS01 or ensure all assets are distributed.

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Option 2: Members' Voluntary Liquidation (MVL)

When to use: Company is solvent (can pay all debts) but has significant assets — typically cash or investment holdings — to distribute. The main reason to choose MVL over striking off is tax efficiency for distributions.

Why MVL is more tax-efficient than dividends: Under ESC C16/Extra Statutory Concession (and its statutory replacement), distributions from a company being wound up can be treated as capital, not income. Capital Gains Tax rates (10% basic rate; 20% higher rate — or 18%/24% from April 2024 on most gains) are lower than dividend rates (8.75%/33.75%/39.35%). Additionally, Business Asset Disposal Relief (formerly Entrepreneurs' Relief) may reduce the CGT rate to 10% on the first £1 million of qualifying gains.

• Example:
• Company has £200,000 in cash (post-tax profit). Founder wants to close it.
• Dividends route: £200,000 dividend → approximately £67,500 in dividend tax (at higher rate 33.75%)
• MVL route: £200,000 distribution treated as capital → approximately £37,600 in CGT (at 20% on gains above annual exempt amount) → saving approximately £30,000

MVL Process: 1. Directors sign Declaration of Solvency (Statutory Declaration confirming company can pay all debts + interest within 12 months) 2. Shareholders pass special resolution to wind up the company (75% majority required) 3. Appoint a licensed Insolvency Practitioner as Liquidator 4. Liquidator realises all assets, pays all debts, distributes surplus to shareholders 5. Company dissolved

Cost: Insolvency Practitioner fees: £1,500–5,000+ depending on complexity. For a company with only cash to distribute, costs are at the lower end.

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The £25,000 Threshold — Informal Distributions

For distributions up to £25,000 total: HMRC allows the striking off (ESC C16) treatment even without a formal MVL. Above £25,000: formal MVL is required to get capital treatment. This threshold was confirmed by HMRC and applies to the total distribution from the company on winding up.

If your company has less than £25,000 to distribute: use DS01 (struck off). Distribute the cash before filing DS01 (as a dividend or repayment of director's loan), then file DS01 once accounts are zeroed.

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FAQs

Can I re-use the company name after striking off? Not immediately. A struck-off company name can technically be used by a new company after a period, but there are rules about reusing names of recently dissolved companies. Most founders simply choose a new name.

What happens if I forget to close the company after stopping trading? Companies House will eventually attempt to strike the company off for non-compliance (missing confirmation statements). But HMRC continues to expect CT returns. Penalties accumulate. Even a dormant company requires annual filings. Don't ignore it.

How long does an MVL take? Typically 3–6 months from appointment of liquidator to dissolution. The liquidator must advertise the winding up, allow a period for creditor claims, distribute assets, and file final accounts with Companies House.

Can I use MVL if my company has a loan from me (director's loan)? Yes. The MVL process settles all debts, including repaying any director's loans. Director's loans are repaid before dividend/capital distributions. The repayment of a director's loan is not taxable (you're receiving back money you lent).

What if HMRC disputes the solvency declaration? Directors who sign a Declaration of Solvency knowing the company cannot pay its debts commit a criminal offence. If debts emerge after the declaration, the liquidator will investigate. Only use MVL if the company is genuinely solvent.

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