GeneralUpdated 2026-02-12

How do I close my limited company?

Quick Answer

The cheapest option is voluntary strike-off (£10 fee, assets under £25,000). For larger companies, use Members' Voluntary Liquidation (MVL). Outstanding tax affairs must be settled first.

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Detailed Explanation

Options for closing a company

1. Voluntary Strike-Off (DS01) - Cheapest and simplest - Company must have: no debts, no assets (or under £25,000), not traded in 3 months - Cost: £10 to Companies House - Process takes about 3 months - Assets distributed as capital (potential CGT with BADR relief at 10%)

2. Members' Voluntary Liquidation (MVL) - For solvent companies with more assets - Requires licensed insolvency practitioner - Cost: £1,500-3,000+ - Directors' declaration of solvency required - Distributions taxed as capital (BADR may apply)

3. Compulsory Liquidation - When company cannot pay debts - Creditor or court initiated - Directors investigated - Not recommended if voluntary options available

Before closing, you must

- File all outstanding accounts - File all Corporation Tax returns - Pay all tax owed - Settle all debts - Cancel VAT registration - Close bank accounts - Inform employees (redundancy rules apply)

Business Asset Disposal Relief (BADR)

- If distributing over £25,000 via MVL - 10% CGT rate (up to £1m lifetime limit) - Must own 5% and be officer/employee for 2 years

Warning

Distribution without proper process may be taxed as income, not capital.

Source: Companies House Strike-Off Guidance

Real-World Examples

Small E-commerce Business Closure

Sarah runs a small online shop selling handmade crafts. She wants to close her company as it's no longer profitable and she's returning to full-time employment. She has minimal stock left, a small balance in the company bank account (£2,000), and no outstanding debts, making voluntary strike-off the most suitable option.

Software Company Restructuring

TechSolutions Ltd, a software development company, decides to restructure and merge with another company. They have assets exceeding £50,000 after settling all liabilities. They will need to use Members' Voluntary Liquidation (MVL) to ensure a tax-efficient distribution of the remaining capital to shareholders.

Contractor Retiring

John, a contractor providing IT services, is retiring. His limited company has £15,000 in its bank account and no other assets or debts. He can apply for voluntary strike-off, and the £15,000 will be treated as a capital distribution.

Common Mistakes to Avoid

  • Applying for voluntary strike-off while the company is still trading or has outstanding debts, leading to rejection and potential penalties.
  • Distributing assets personally before applying for voluntary strike-off, which can lead to HMRC treating the distributions as income rather than capital gains.
  • Failing to inform all relevant parties (creditors, employees, shareholders) of the intention to strike off the company, risking objections and delays.
  • Not settling all outstanding tax liabilities (Corporation Tax, VAT, PAYE) before attempting to close the company, which will result in rejection of the strike-off application.

What happens if someone objects to my company being struck off?

If a valid objection is received (e.g., from a creditor), Companies House will suspend the strike-off process. You'll need to address the objection, potentially by settling the debt or resolving the dispute, before re-applying.

Can I re-open a company after it has been struck off?

Yes, but only in limited circumstances and generally through a court order ('restoration'). This usually happens if there's a compelling reason, such as needing to pursue a legal claim or deal with previously unknown assets. It's a more complex and costly process than closing the company properly in the first place.

What happens to the company's bank account when it's struck off?

The company bank account will be frozen, and any remaining funds will ultimately pass to the Crown. Therefore, it's crucial to distribute all remaining assets legally before applying for strike-off or entering liquidation.

What records do I need to keep after closing my limited company?

You are legally required to keep company records (accounting records, statutory registers, meeting minutes) for a minimum of six years from the date of dissolution. This applies even if the company is struck off.

Practical Tips

  • Before applying for voluntary strike-off, ensure all company expenses are paid, and all income has been declared to minimise the company's assets to below £25,000.
  • Check your company's registered office address is up-to-date at Companies House before starting the strike-off process, as all official communications will be sent there.
  • Download and keep copies of all key company documents (e.g., annual accounts, confirmation statements) before the company is dissolved, as access to these will be lost.
  • If you're unsure about the best way to close your company, seek professional advice from an accountant or insolvency practitioner to ensure you comply with all legal and tax requirements.

Related Questions

Do I need an accountant for my limited company?

No, it's not a legal requirement. You can prepare and file your own accounts and tax returns. However, many directors use accountants or accounting software for compliance and tax optimization.

How much does an accountant cost for a limited company?

UK accountants typically charge £100-300 per month for small limited companies. Annual accounts and tax returns cost £500-1,500 on a one-off basis. AI alternatives like AccountsOS cost £20/month + VAT after a 14-day free trial.

How do I register a limited company?

Register online with Companies House for £50 (usually processed same day). You need a company name, registered address, director details, and shareholder information.

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