Closing a solvent limited company: striking off or liquidation?

Two routes for a solvent company

Striking off is the simpler and cheaper option. The directors apply to Companies House on form DS01, provided the company has not traded, sold stock or changed its name in the last three months and is not subject to insolvency proceedings. The application is published in the Gazette, and if there are no objections the company is dissolved about two months later.

A members’ voluntary liquidation (MVL) is a formal process. The directors swear a declaration that the company can pay its debts within twelve months, and the shareholders appoint a licensed insolvency practitioner as liquidator to collect the assets, pay creditors and distribute what remains.

Why the route matters for tax

Money paid to shareholders before a company is struck off is normally taxed as a dividend. There is an important exception: if the total distributed in anticipation of striking off is £25,000 or less, it can be treated as capital, which may mean a lower tax rate.

Distributions made by a liquidator in an MVL are usually capital, whatever the amount. That can allow access to Business Asset Disposal Relief where the conditions are met, at 18% from 6 April 2026 (14% in 2025–26).

Do not leave anything behind

Anything still owned by a company when it is dissolved, including money in the bank and refunds that arrive later, passes to the Crown. Before applying to strike off, collect money owed, settle liabilities, close PAYE and VAT registrations, file final accounts and returns, and decide how remaining funds will be distributed.

If the company cannot pay its debts

Striking off is not available to a company that owes money it cannot pay. A licensed insolvency practitioner should be consulted, and directors should take care not to make the creditors’ position worse.

For help choosing the right route and getting the order right, see winding up a company.