The short answer
A solvent company with small funds can usually be closed by striking off, which costs £33 and takes about three months. A members’ voluntary liquidation costs more but is better for larger sums, because the money is generally taxed as capital gains rather than income. An insolvent company needs a creditors’ voluntary liquidation.
Checked 26 October 2026. Rates for 2026/27.Key facts
| Fact | Detail |
|---|---|
| Striking off fee | £13 with form DS01 |
| Time to strike off | About 2 to 3 months |
| MVL cost | Typically £1,500 to £4,000 or more |
| Distribution limit for capital treatment on strike off | £25,000 |
| Insolvent company route | Creditors’ voluntary liquidation |
Three ways to close a company
A limited company can be closed in three main ways. It can be struck off the register by Companies House, which is quick and cheap. It can be liquidated in a members’ voluntary liquidation if it is solvent, which is more formal and uses a licensed insolvency practitioner. Or it can go into creditors’ voluntary liquidation if it cannot pay its debts.
Which route is suitable depends on whether the company is solvent, how much money it holds, and what you want to do with the funds. The wrong choice can mean more tax or personal liability, so decide before you start.
Striking off: how it works
Voluntary strike-off is suited to companies with no debts and little cash. A director applies to Companies House using form DS01 and pays £13. Companies House publishes a notice in the Gazette, and after about two months, if there are no objections, the company is struck off and dissolved.
You must tell creditors, shareholders, employees and HMRC about the application, and file final accounts and tax returns. The company must not have traded, changed its name or been in insolvency proceedings in the previous three months. If you fail to notify interested parties, the strike-off can be reversed and you may face penalties.
Tax on money taken out when striking off
If the company has funds left, they can be distributed to shareholders before the strike-off. Distributions of up to £25,000 in total may be treated as capital and subject to Capital Gains Tax, which is usually cheaper than dividend tax. Above £25,000, the whole amount is taxed as a dividend, which can be much more expensive.
You must also pay the company’s final Corporation Tax, settle all debts, and deal with any outstanding director’s loan balance. Business Asset Disposal Relief may apply to the capital distribution if you meet the conditions, as long as the company ceased trading within three years.
Members’ voluntary liquidation
For companies with more than £25,000 to distribute, or where you want certainty, a members’ voluntary liquidation, or MVL, is often preferred. A licensed insolvency practitioner is appointed as liquidator, who closes the business, pays creditors, collects the assets and distributes the rest to shareholders.
The costs are higher, often £1,500 to £4,000 or more, depending on the complexity. In return, distributions are treated as capital, which can be taxed at 18% or at the Business Asset Disposal Relief rate rather than at dividend rates. For significant amounts, the tax saving can easily outweigh the cost.
When the company cannot pay its debts
If the company is insolvent, striking off is not appropriate, because it does not deal with debts and creditors may object. Instead, the directors should seek advice from a licensed insolvency practitioner. A creditors’ voluntary liquidation lets the directors place the company into liquidation in an orderly way, protecting them from wrongful trading claims.
Continuing to trade while insolvent can make directors personally liable for debts. Act early, because options narrow quickly as problems grow.
The anti-phoenixing rule
The Targeted Anti-Avoidance Rule can turn a capital distribution into income if you close a company and, within two years, set up a similar business in which you have an interest. This is intended to stop people avoiding income tax by repeatedly liquidating and restarting companies. If you plan to continue similar work after closing, take advice first.
Genuine closures, such as retirement or a change of career, are not caught. Keep a clear record of why the company was closed.
A closing checklist
Whichever route you choose, work through a practical checklist. Cease trading and settle all debts. File the final accounts and Corporation Tax return with a statement that the company has ceased. Pay any tax due, including PAYE and VAT, and deregister for those taxes. Deal with the director’s loan account. Notify HMRC, creditors and employees. Close the bank account after the final payments.
Keep company records for at least six years after closure, because HMRC can still ask for them. If you are unsure, an accountant can manage the process, make sure nothing is missed, and recommend the most tax-efficient route.
Worked example: closing a company with £60,000
Imagine a company holding £60,000 of retained profits after tax, which the owner wants to take out when closing. If the company is struck off, the £25,000 limit means the whole £60,000 would be taxed as a dividend, which could cost over £15,000 for a higher rate taxpayer. If the company enters a members’ voluntary liquidation, the £60,000 can be taxed as a capital distribution, at 18% with Business Asset Disposal Relief if it applies, which is roughly £10,800, so the tax saving could be around £4,000 to £5,000.
The liquidator’s fee of perhaps £2,000 to £3,000 reduces the benefit, but the choice becomes clearer as the amount grows. For funds well above £25,000, a liquidation is usually the better route, and the decision is a good use of a short consultation.
What happens to company records and debts after closure
After closure, the company’s assets that were not distributed pass to the Crown, so make sure everything is dealt with first. Debts owed to the company are collected or written off. Contracts are terminated, leases ended and licences cancelled. The director must retain the accounting records for at least six years after dissolution, because HMRC can still ask questions about the final years.
If a creditor emerges after strike-off, the company can be restored to the register so that the debt can be pursued. Making sure all liabilities are cleared before closing avoids this risk.
Choosing between the routes
To decide, ask three questions. Is the company solvent, meaning it can pay all its debts? How much cash is left to distribute? Do you plan to carry on a similar business? If the company is solvent with under £25,000 to distribute and you do not plan to restart a similar trade, striking off is likely the cheapest option. If it holds more, a members’ voluntary liquidation often saves tax. If it cannot pay its debts, take advice about a creditors’ voluntary liquidation as soon as possible. A short conversation with an accountant before you act will show which route leaves you with the most money.
The bottom line
A solvent company with small funds can usually be closed by striking off, which costs £33 and takes about three months. If you would rather not do it alone, our fixed fees start at £45.83 + VAT a month.
Frequently asked questions
How much does it cost to strike off a limited company?
The Companies House fee is £13 for form DS01. Accountant fees for the final accounts and tax return are extra.
What is the difference between strike off and liquidation?
Striking off removes the company from the register with minimal formality, while liquidation is a formal process run by an insolvency practitioner that deals with assets, debts and distributions.
Is money from a strike off taxed as capital?
Up to £25,000 can be treated as capital, taxed under Capital Gains Tax, if the conditions are met. Above that amount, the whole sum is taxed as a dividend.
Can I close a company that owes money?
Not by simple strike off. Debts must be settled first, or the company should go through a creditors’ voluntary liquidation with an insolvency practitioner.
Can a struck-off company be restored?
Yes, within six years in many cases, but it requires an application to Companies House or the court, and has a cost. It is better to complete the closure properly.
How long does it take to close a company?
A voluntary strike-off normally takes around two to three months after the application. A members’ voluntary liquidation takes longer, often several months, depending on the complexity of the company’s affairs.
This article is general information, not personal tax or financial advice. Rules and rates change, so check GOV.UK or speak to an accountant about your circumstances. Rates shown are for 2026/27, last checked November 2026.