There are three ways to close a UK limited company, and which one you use depends on whether it can pay its debts. A solvent company can apply to be struck off the register using form DS01, which costs £13 online or £18 on paper, or it can go through a members' voluntary liquidation (MVL) run by a licensed insolvency practitioner. An insolvent company has to deal with its creditors first, usually through a creditors' voluntary liquidation or administration. Striking off is usually the cheapest route. Whether it is the right route depends mostly on how much money is left in the company.
Strike-off, MVL or insolvency: choosing the route
| Route | When it fits | Who runs it | Typical cost |
|---|---|---|---|
| Voluntary strike-off (DS01) | Solvent, debts paid, modest reserves left | The directors | £13 online, £18 paper, plus final accounts |
| Members' voluntary liquidation | Solvent, with significant reserves to distribute | A licensed insolvency practitioner | Insolvency practitioner's fees |
| Creditors' voluntary liquidation or administration | Insolvent, so the company cannot pay its bills | A licensed insolvency practitioner | Insolvency practitioner's fees |
GOV.UK states the order of priority plainly: when a company is insolvent, the interests of its creditors "legally come before those of the directors or shareholders". An insolvent company should not be struck off as a way of walking away from its debts. Take advice from an insolvency practitioner before doing anything else.
Can your company be struck off?
Section 1004 of the Companies Act 2006 bars a strike-off application if, at any time in the previous three months, the company has:
- Changed its name. Any name change in the period disqualifies it;
- Traded or carried on business. Paying off a liability that arose from past trading does not count as trading;
- Sold trading stock. That is, disposed for value of property it held for sale in the normal course of business;
- Done anything else. The exception is activity needed to make the application, conclude the company's affairs or comply with a statutory requirement.
GOV.UK adds that the company must not be threatened with liquidation and must have no arrangement with creditors, such as a Company Voluntary Arrangement. If any of these conditions apply, you will need to liquidate instead. Making an application in breach of section 1004 is a criminal offence.
How to close a company through Companies House, step by step
- Stop trading and tidy up. Collect debts owed to the company, pay suppliers, and close the PAYE scheme if you employed staff. Deregister for VAT if you are registered;
- File the final accounts and tax return with HMRC. GOV.UK says you must send final statutory accounts and a Company Tax Return to HMRC and pay all Corporation Tax. You do not have to file final accounts with Companies House. If the final year made a loss, terminal loss relief may let you carry it back against earlier profits;
- Distribute or deal with every asset. Pay out the remaining cash, close the bank accounts and transfer anything else, such as domain names. Under section 1012, anything the company still owns when it is dissolved passes to the Crown as bona vacantia. GOV.UK warns that this includes payments the company receives later, such as an HMRC refund;
- File form DS01. The application must be made by the directors or a majority of them (section 1003). The online service costs £13;
- Send a copy to everyone affected within seven days. Section 1006 requires a copy to go to every member, employee, creditor and director who did not sign, and to any pension fund trustees. Deliberately concealing the application from one of these people is an aggravated offence that can carry up to seven years' imprisonment;
- Wait out the Gazette notice. Companies House publishes a notice in The Gazette. If nobody objects, the company can be struck off once two months have passed. A second notice then confirms the dissolution.
If the company starts trading again or becomes insolvent before it is dissolved, you must withdraw the application. Only one director needs to sign the withdrawal form.
The cheapest way to close a limited company, and the £25,000 trap
The DS01 fee is the cheapest part. The tax treatment of the money you take out is where the real cost lies. Section 1030A of the Corporation Tax Act 2010 treats a distribution made in anticipation of a strike-off as capital, not income, but only if, at the time of the distribution, the company has collected or intends to collect the money owed to it, has settled or intends to settle its liabilities, and the total distributed does not exceed £25,000. If the company is not dissolved within two years, or fails to collect its debts and settle its liabilities, the capital treatment is withdrawn (section 1030B).
The limit is a cliff edge, not a band. If the total goes over £25,000, the whole amount, and not just the excess, is treated as an income distribution and taxed at dividend rates. This is the main reason companies with larger reserves use an MVL. Distributions in a winding up are not income distributions (CTA 2010 s1030), so they fall within Capital Gains Tax. Where the conditions are met, Business Asset Disposal Relief applies at 18% for disposals from 6 April 2026, on up to £1 million of lifetime gains.
Worked example. Two shareholders own a consultancy that has stopped trading. After the final Corporation Tax bill and all creditors are paid, £22,000 is left. Distributing it before a DS01 application keeps it within the £25,000 limit, so each shareholder reports a capital distribution of £11,000. If £60,000 were left instead, a strike-off would turn the entire £60,000 into dividend income. An MVL would cost more in fees but could keep the distribution as capital.
There is a further anti-avoidance rule. Under section 396B of ITTOIA 2005, a winding-up distribution from a close company can be taxed as income where a shareholder with at least a 5% interest carries on a similar trade within two years and avoiding income tax was a main purpose. Closing one company and restarting the same business in a new one is the classic case it targets.
After dissolution: restoration and liability
Dissolution does not wipe the slate clean. Section 1003(6) preserves the liability of every director and member "as if the company had not been dissolved". A former director, member or creditor (HMRC included) can also apply to the court to restore the company. The general deadline is six years from dissolution (section 1029 onwards). Administrative restoration, which costs £341, is available to former directors or members, but only for companies struck off by the registrar rather than on their own application. Keep the company's books and records for at least seven years after it is struck off, which is what GOV.UK recommends.
If you are not ready to close, a non-trading company can be kept dormant indefinitely. It still has to file accounts and a confirmation statement every year.
Sources and further reading
Primary sources: GOV.UK, Closing a limited company and Strike off your limited company; Companies House, Companies House fees; Companies Act 2006, s1003, s1004, s1006 and s1012; CTA 2010 s1030A; ITTOIA 2005 s396B; TCGA 1992 s169N. For larger reserves, see our guide to solvent liquidation (MVL).
Acumon prepares final accounts and Company Tax Returns for closing companies through our statutory accounts service, and our company secretarial team can handle the DS01 filing and notifications.