Closing the Company Is the Easy Part
The mechanics of closing a solvent limited company are genuinely simple. You fill in one form, you pay £13, you wait about three months, and the company stops existing. Companies House has made the process about as frictionless as a legal act can be, and in February 2026 they made it 61% cheaper.
Almost none of the risk sits in that form.
The risk sits in the order you do things, in what is left inside the company on the day it dissolves, and above all in how you take the money out. We have seen directors save a £3,000 professional fee on the closure and lose £7,000 in avoidable tax doing it. We have seen companies dissolved with money still in the bank account, which is now legally the property of the Crown and, because of a quirk almost nobody knows about, cannot be recovered by the cheap route.
So this guide is deliberately weighted. The strike off procedure is covered in full, because you need it and it is easy to get right. Most of the length goes on the two things that actually decide whether closing your company was a good financial decision: the sequence of steps before you file, and the tax treatment of the cash on the way out.
The Three Ways a Limited Company Closes
Before anything else, work out which situation you are in, because the routes are not interchangeable and choosing the wrong one is not a small mistake.
| Route | When it applies | Who runs it | Rough cost |
|---|---|---|---|
| Voluntary strike off (DS01) | Solvent company, no significant assets left, no creditors outstanding | You | £13 |
| Members' voluntary liquidation (MVL) | Solvent company with meaningful reserves or assets to distribute | Licensed insolvency practitioner | £2,000 to £4,000 plus VAT |
| Creditors' voluntary liquidation (CVL) | The company cannot pay its debts | Licensed insolvency practitioner | £4,000 upwards |
The dividing line between the first two is money, and we will put an actual number on it later, because the number people usually quote is wrong.
The dividing line between the first two and the third is solvency, and it is not negotiable. If your company cannot pay its debts, striking it off is not an option you are choosing between, it is a route that is closed to you. Section 1004 and section 1005 of the Companies Act 2006 block a strike off application where the company is in, or threatened with, insolvency proceedings, and applying anyway while knowing the company owes money it cannot pay is where directors move from a tidy administrative exit into personal exposure. If that is your situation, stop reading and speak to a licensed insolvency practitioner. Nothing below will help you and some of it will hurt you.
Route One: Voluntary Strike Off, Step by Step
Voluntary strike off, also called dissolution, is an application under section 1003 of the Companies Act 2006 asking the registrar to remove your company from the register. It is the right route for the large majority of small companies that have simply stopped.
Can you use it?
Section 1004 sets out a look back test. In the three months before you apply, the company must not have:
- traded or otherwise carried on business
- changed its name
- disposed of, for value, property or rights that it held for disposal or gain in the normal course of trading
- engaged in any other activity
That last bullet reads alarmingly broadly, and it is softened by three exceptions. You are allowed to do things necessary to make or decide on the strike off application, things necessary to conclude the affairs of the company, and anything required by law. Settling old liabilities is expressly not treated as trading, so paying off a supplier from last year does not restart the clock.
Section 1005 then blocks the application entirely if there are insolvency proceedings on foot, a scheme of arrangement, an administration, a receivership or a winding up petition.
The three month clock runs backwards, and it is the one thing you cannot fix
This is the point in the process most people discover too late, so it is worth stating plainly.
Every other requirement of a strike off can be corrected after you notice it. Forgot to close the bank account? Withdraw the application and close it. Missed a creditor off the notification list? Send them a copy now. Filed with the wrong signatures? File again.
The three month rule is the only requirement that can only be satisfied by waiting. It measures backwards from the date of your application, so nothing you do today can shorten it. The practical consequence is that the date you can close the company is set by the date you stopped trading, not by the date you decided to close. If you invoiced a final client in July, your earliest DS01 is in October, and no amount of urgency changes that.
Our advice to anyone winding down is therefore to treat the last invoice as the starting gun and use the three months productively, rather than discovering in month one that you have three months to wait and doing nothing with them. There is a closing down checklist further down this page that fits neatly into exactly that window.
Filing the DS01
The application itself is form DS01. You can file it online through the Companies House close a company service or on paper.
- Online: £13. This is the route we recommend, and not only for the price. The online service checks the form as you go and gives you a filing receipt.
- Paper: £18.
The form must be signed by a majority of the directors. One director signs alone. Two directors both sign, because a majority of two is two, not one. Three directors need two signatures.
One small trap that catches people every time: you cannot pay the fee from the company's own bank account. Companies House will reject a payment made by the company being struck off, on the reasonable basis that a company applying to be struck off should not still be spending money. Pay it personally.
Making a dishonest strike off application is a criminal offence, and the offence is not limited to hiding debts. Applying while knowing the company traded within the last three months is enough.
The seven day duty almost everyone breaches
Section 1006 requires that within seven days of filing the DS01, you send a copy of the application to every one of the following:
- members, which normally means the shareholders
- creditors, existing and likely future ones
- employees
- managers or trustees of any employee pension fund
- any director who did not sign the form
The duty is ongoing. If someone becomes a creditor or a director after you file, they get a copy too, right up until the company is dissolved or the application is withdrawn. Failing to do this is a criminal offence carrying a fine and possible prosecution, not a paperwork slip.
Read the creditor list carefully, because Companies House guidance is explicit that it includes banks, suppliers, former employees still owed money, landlords, tenants, guarantors, personal injury claimants, the Department for Work and Pensions, and HMRC.
That last one is where the design of the rule becomes obvious. Directors tend to think of the DS01 as a private administrative filing that quietly removes the company from a database. Parliament clearly did not see it that way. The Act obliges you to personally hand a copy of your closure application to the creditor most likely to object to it, within a week, on pain of prosecution. A strike off is not a way of slipping out quietly, and it was never meant to be. It is a public notice period with a statutory mailing list, and understanding that changes how you should prepare for it: get square with HMRC first, so that the copy you are obliged to send them is uninteresting.
What happens next
Companies House acknowledges the application, and if it is in order publishes a notice in the relevant Gazette. The registrar will not strike the company off until not less than two months after that notice.
Assume roughly three months from filing to dissolution in a clean case. A second Gazette notice then confirms the company no longer exists.
During the two month window, anyone can object. Objections must reach Companies House at least two weeks before the proposed dissolution date and must be backed by evidence. The common ones are an unpaid creditor, live legal proceedings, or HMRC chasing an outstanding return or liability. An objection suspends the application rather than killing it, and the usual fix is to deal with whatever prompted it and let the process resume.
You also have your own obligation to stop the process. Under section 1009, the application must be withdrawn if the company no longer qualifies, for example because it has started trading again or become insolvent, or if you simply change your mind.
The Closing Down Checklist
This is the work that fits inside the three month wait. Do it in this order.
Tell HMRC the company has stopped trading. The accounting period for Corporation Tax ends when trading ceases, which usually means a short final period and a final return. Corporation Tax is due nine months and one day after the period end, and the return is due twelve months after it. If the final period made a loss, ask about terminal loss relief before you write the year off, because a trading loss in the final twelve months can be carried back against profits of the previous three years and can be worth real money at exactly the point the company needs it.
Deal with employees properly. Follow the redundancy rules, pay final wages, and settle any statutory redundancy pay due. Then close the PAYE scheme: submit a final Full Payment Submission marked as the final submission because the scheme has ceased, with the date of cessation, and issue P45s. Our guides to PAYE and the P45 cover the mechanics.
Cancel the VAT registration within 30 days. You must cancel within 30 days of ceasing to be eligible or you can be charged a penalty. Do it online where you can, or on form VAT7. Then submit a final VAT return. Watch the deemed supply rule here: if you reclaimed VAT on stock or assets you still hold at the cancellation date, and the VAT due on them comes to more than £1,000, you have to account for it on that final return. Directors who kept the laptop, the van or the tools are the ones who trip this.
Settle everything owing, and collect everything owed. Pay the creditors. Chase the trade receivables, because after dissolution nobody has standing to collect them. Clear any overdrawn director's loan account, which is a debt owed to the company and one HMRC takes an interest in, and remember that writing it off rather than repaying it has its own income tax consequence.
Distribute the assets, then empty and close the bank account. This is the step with the sharpest edge on it. Transfer or sell anything the company owns, including domain names, intellectual property, vehicles and equipment. Then take the cash out and close the account. There is a section below on why leaving anything behind is worse than it sounds.
Keep the records. Companies House guidance says to keep business records for seven years after the company is struck off. If the company had employees, keep employers' liability insurance records too, and keep them for far longer than seven years, because industrial disease claims surface decades later.
Do not file final accounts with Companies House. This surprises people, but a company being struck off does not need to deliver final statutory accounts to the registrar. HMRC still wants accounts with the final Company Tax Return. Companies House does not.
The Part That Actually Costs Money: Getting the Cash Out
Everything above is procedure. This section is where the money is, and it is the section most guides skate over.
When a solvent company hands its remaining reserves to shareholders on the way out, that payment can be taxed in one of two completely different ways. As income, meaning a dividend, taxed at 10.75%, 35.75% or 39.35% depending on your band. Or as capital, meaning a disposal of your shares, taxed under Capital Gains Tax rules, potentially at the 18% Business Asset Disposal Relief rate.
The gap between 35.75% and 18% on a five figure sum is the whole ball game. Which side you land on is decided by section 1030A of the Corporation Tax Act 2010.
The £25,000 rule, and why it is a cliff edge rather than an allowance
Until 2012 this was handled by an extra statutory concession, ESC C16. Since 1 March 2012 it has been statute. Section 1030A lets a distribution made in anticipation of a strike off be treated as capital rather than income, provided:
- the company has collected in, or intends to collect in, the debts owed to it
- the company has paid, or intends to pay, its own debts
- the amount of the distribution, or the total amount of the distributions if there is more than one, does not exceed £25,000
Read that third condition as it is written, because a great deal of published advice paraphrases it wrongly. It is a condition, not an allowance.
If the total comes to £25,001, the condition is not satisfied by £25,000 of it. It is not satisfied at all. Section 1030A does not apply, and the whole distribution is treated as income, not just the excess over £25,000. There is no first slice at the capital rate.
Two consequences follow, and both are worth money.
It is per company, not per shareholder. Four equal shareholders taking £8,000 each have not each stayed inside a £25,000 limit. They have made distributions totalling £32,000, the condition fails, and all four are taxed on dividend income.
The fix is sequencing, not size. If the company holds £60,000, you do not have to abandon capital treatment on the lot. You pay £35,000 out as an ordinary dividend first, in the normal way, taxed as income and declared on your Self Assessment return. What is then left in the company, and distributed in anticipation of dissolution, is £25,000, the condition is satisfied, and that £25,000 is capital. The bill is materially lower than distributing £60,000 in one go and having every pound of it taxed as income.
There is also a two year backstop. If the company has not actually been dissolved within two years of the distribution, or the debt conditions have not been met by then, normal income treatment applies retrospectively. Capital treatment is provisional until the company is gone.
Where the break even against a liquidation really sits
The received wisdom is that you strike off below £25,000 of reserves and liquidate above it. That rule of thumb confuses the statutory limit with the decision point, and it costs people money, because at £30,000 of reserves an MVL is not obviously worth it and at £60,000 it obviously is. The limit is not the crossover. The crossover is where the extra tax you pay by striking off exceeds what a liquidator charges.
So here is the arithmetic, for 2026/27, for a single higher rate shareholder with Business Asset Disposal Relief available and the annual exempt amount already used elsewhere.
Take a company with £80,000 of distributable reserves.
Strike off route. £55,000 must come out as a dividend to bring the anticipatory distribution down to £25,000. At 35.75% that is £19,662.50 of income tax. The remaining £25,000 is capital, and with a nominal base cost the gain is about £24,900, taxed at 18% for £4,482. Total tax around £24,145, plus the £13 fee.
MVL route. A liquidator charges, say, £3,000 including VAT, leaving £77,000 to distribute. The whole £77,000 is a capital distribution in a winding up. The gain is about £76,900, taxed at 18% for £13,842. Total cost, tax plus fee, around £16,842.
The liquidation is roughly £7,300 better on an £80,000 company, after paying the insolvency practitioner. That is not a rounding difference, it is a holiday.
Run the same comparison downwards and the two routes meet at approximately £39,000 to £43,000 of reserves, depending on what the liquidator charges. Below that, strike off wins and the £13 route is genuinely the right answer. Above it, the professional fee pays for itself and then some.
So the real rule of thumb, on current rates, is closer to £40,000 than £25,000. And note which direction the error runs. Anyone using the £25,000 figure as their decision point is being told to strike off in a band where doing so is right, which is harmless, but they are also being handed a number that stops mattering the moment they look at it, because the £25,000 in the statute has nothing to do with the £40,000 in the decision. The two numbers are unrelated and they get conflated constantly.
Two health warnings on that arithmetic, because it is arithmetic and not advice. It assumes Business Asset Disposal Relief is available, which needs a 5% holding of shares and votes, held for at least two years, in a trading company where you were an officer or employee. And it assumes one higher rate shareholder. Multiple shareholders with different marginal rates, unused annual exempt amounts, or a spouse in a lower band can move the crossover a long way in either direction. Model your own numbers, or ask us to, before you commit. Our dividend tax calculator and capital gains tax calculator will get you close.
The relief has a three year fuse on it
One more timing point that is easy to miss and impossible to fix afterwards.
Business Asset Disposal Relief normally requires a trading company. When a company stops trading it stops being one, so there is a concession: you can still qualify if you dispose of the shares within three years of the company ceasing to trade.
Directors who stop trading, leave the company sitting there while they decide what to do, and get round to closing it four years later have lost an 18% rate and fallen back to the standard Capital Gains Tax rates. If there is a dormant shell in your life with money in it, the clock on that relief started running when the trade stopped, not when you got interested in closing it. Our guide to dormant companies covers what else that shell is quietly costing you.
Closing one company and opening another
The question comes up constantly, usually phrased as whether you can close the company, take the reserves as capital, and start again next Monday.
The answer is that a Targeted Anti-Avoidance Rule exists precisely for that, at section 396B of the Income Tax (Trading and Other Income) Act 2005. It recharacterises a capital distribution on a winding up as an income distribution where four conditions are all met:
- Condition A: you held at least 5% of the company immediately before the winding up
- Condition B: the company was a close company at some point in the two years before the winding up started
- Condition C: within two years of the distribution, you carry on or are involved with the same trade, or a similar one
- Condition D: it is reasonable to assume that a main purpose of the winding up was to avoid or reduce income tax
Condition C is the one that bites, and note how wide it is. It is not limited to incorporating a new company. Carrying on the same trade as a sole trader catches it, and so does being involved with someone else's business in the same field. Two years is a long time to keep out of your own industry.
Condition D is the escape route, and it is genuinely a real one. Retiring, emigrating, ill health, a genuine change of career, or a business that simply failed are all ordinary commercial reasons for closing a company, and the TAAR is not meant to catch them. But "reasonable to assume" is HMRC's test applied to your facts after the event, so the time to write down why you closed the company is while you are closing it, not three years later when a letter arrives.
Route Two: Members' Voluntary Liquidation
An MVL is a formal winding up of a solvent company. The shareholders pass a resolution to wind up, and a licensed insolvency practitioner is appointed as liquidator to realise the assets, settle the liabilities and distribute what is left.
The gateway is the declaration of solvency, a statutory statement by the directors that the company can pay all of its debts, with interest, within twelve months. Signing one when the company cannot is a serious matter with personal consequences, so this is not a form to sign optimistically.
What you get for the fee is that every distribution to shareholders is a capital distribution in a winding up. No £25,000 condition, no sequencing puzzle, and Business Asset Disposal Relief available on the whole amount if you qualify. As the numbers above show, on a company with real reserves that treatment is worth several times what the liquidator charges.
An MVL takes longer than a strike off, typically several months to a year, largely because the liquidator has to advertise for creditors and give them time to come forward. Most of that wait is not your problem, since the bulk of the cash is usually distributed early.
Route Three: When the Company Cannot Pay
If the company is insolvent, the route is a creditors' voluntary liquidation, run by a licensed insolvency practitioner appointed by the creditors.
We are not going to cover CVL in depth here because it is genuinely specialist territory and the wrong moment to be reading a general guide. The one thing worth saying is about what people try instead. Directors of struggling companies quite often reach for the DS01, on the theory that a struck off company cannot be pursued for its debts. It is understandable and it is a bad idea. Creditors object, HMRC objects, the application stalls, and the attempt itself becomes evidence about your conduct. The section below explains why the theory is wrong anyway.
Compulsory Strike Off Is a Different Thing
If a first Gazette notice for compulsory strike off appears against your company, that is not your application working its way through. That is the registrar striking your company off under section 1000 or 1001, usually because accounts or confirmation statements are overdue and letters have gone unanswered.
The outcome looks identical, the company is dissolved, but the causes and the consequences are not the same. A compulsory strike off leaves whatever was inside the company to the Crown without anyone having planned for it, and it happens to companies with active bank balances, live contracts and a director who has moved house and stopped opening post. Our guide to the confirmation statement covers the filing that most often triggers it.
There is one significant difference in the other direction, and it is covered next.
What Dissolution Does Not Do
Three things survive the end of your company, and all three are routinely misunderstood.
Anything left inside it belongs to the Crown, and getting it back is not cheap
On dissolution, everything the company still owns becomes bona vacantia, ownerless goods, and passes to the Crown. The bank account is frozen. That includes cash, unbanked cheques, and payments that arrive afterwards, such as a Corporation Tax or VAT refund you were owed and had forgotten about. Property, domain names, intellectual property and unpaid invoices go the same way.
Now the part that is genuinely obscure and matters enormously.
You can restore a dissolved company, and there are two routes. Administrative restoration costs £341, is done on form RT01, and is available for up to six years after dissolution. Restoration by court order is a court application, costs a multiple of that once you add legal fees, and is open to a wider range of applicants.
Administrative restoration under section 1024 of the Companies Act 2006 is only available where the company was struck off by the registrar under sections 1000, 1001 or 1002A. It is not available where the directors applied to strike the company off themselves under section 1003.
So the asymmetry runs like this. A company that got struck off through neglect can be restored cheaply and administratively. A company whose directors did the responsible thing and filed a DS01 can only be restored by going to court. The cheapest way out is the most expensive way back, and almost nobody knows that at the point they file, because every guide quotes the £341 figure without saying who it is actually available to.
We are not suggesting anyone should let their company be struck off compulsorily instead. The point is narrower and more useful: if you are filing a DS01, treat it as irreversible, because for practical purposes it is. Empty the bank account. Chase the refunds. Check for the standing order nobody cancelled. Do it before you file, not after the second Gazette notice, when the answer to "how do we get that £4,000 back" is a solicitor and a court date.
It does not end your exposure as a director
The theory that dissolution draws a line under everything stopped being true on 15 December 2021.
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 gave the Insolvency Service power to investigate the conduct of directors of dissolved companies and bring disqualification proceedings, without having to restore the company first. Before that Act, investigating a dissolved company meant a court application to restore it, which was slow and expensive enough that it rarely happened, and that gap was exactly why striking off looked like an exit.
The power also applies retrospectively, to conduct before the Act came into force. Disqualification can run for up to fifteen years, and in the most serious cases there is prosecution and personal liability for company debts.
Alongside that, personal guarantees survive dissolution untouched, because they were never the company's obligation in the first place. So did the guarantee your bank asked for on the overdraft.
It does not tidy up your own tax position
Closing the company does not close your Self Assessment record. The final dividends and the capital distribution have to be reported in the right tax year, and Business Asset Disposal Relief has to be claimed rather than granted. Keep the paperwork: the DS01 receipt, the Gazette notices, the final accounts, the distribution calculations and your note of why the company was closed. If HMRC ever asks about the TAAR, contemporaneous evidence of an ordinary commercial reason is worth more than a good memory.
Our View
Three things we would say to any director thinking about this, none of which are in the official guidance.
Separate the two decisions. Whether to close the company and how to get the money out are different questions, and people collapse them into one because both feel like "closing the company". Decide first whether the company has a future. Only then work out the cheapest lawful way to empty it. Doing it in the other order is how you end up choosing a tax route to justify a closure decision you had not properly made.
The £13 fee is a distraction. It is a real and welcome reduction, and it is also almost irrelevant to the total cost of closing a company with money in it. On an £80,000 company, the difference between the right and wrong distribution sequence is over five hundred times the filing fee. Spend the attention where the pounds are.
Close it, or run it properly. The worst outcome we see is neither. A company that stopped trading three years ago, still has £30,000 in it, has never been formally closed, is quietly accruing filing obligations, has lost Business Asset Disposal Relief to the three year rule, and belongs to a director who intends to sort it out at some point. Every year that passes makes that company worse to own and no easier to close. If the business is over, the closing is the last piece of work the business owes you, and it is usually the best paid hour of the lot.
How IAK Can Help
Most of our closure work is not the DS01. It is the six weeks before it.
We work out which route is right by running your actual numbers rather than a rule of thumb, and we say plainly when a strike off is the answer and a liquidator would be a waste of your money. Where an MVL is clearly better we will tell you that too, and introduce you to an insolvency practitioner we trust. We handle the final Corporation Tax return and the terminal loss claim, the VAT deregistration and the deemed supply on retained assets, the PAYE closure, the director's loan account, and the sequencing of distributions so that the capital treatment survives contact with HMRC.
We also do the unglamorous sweep that saves the most money: finding the direct debit still running, the refund still due, the client who never paid, and the £4,000 sitting in a bank account that was about to become the property of the Crown.
If you have stopped trading, or you are about to, the useful conversation happens now, while the three month clock is running and everything is still fixable. See how we work with small businesses, read our guide to sole trader versus limited company if you are closing one to become the other, or get in touch for a free consultation.
Sources
- Companies Act 2006, section 1003, legislation.gov.uk, on the striking off application by a company.
- Companies Act 2006, section 1004, legislation.gov.uk, on the three month look back and its exceptions.
- Companies Act 2006, section 1006, legislation.gov.uk, on the duty to give a copy of the application to members, creditors and employees.
- Companies Act 2006, section 1024, legislation.gov.uk, on administrative restoration and the sections it is available for.
- Striking off or dissolving a limited company, GOV.UK, on signatures, the notification list, objections, the two month Gazette period and bona vacantia.
- Strike off your limited company from the Companies Register, GOV.UK, on eligibility and closing the company down properly.
- Restoring a company to the Companies House register, GOV.UK, on both restoration routes and their time limits.
- Companies House fees, GOV.UK, on the £13 digital and £18 paper voluntary strike off fees and the £341 administrative restoration fee.
- CTM36220, Company Taxation Manual, HMRC, on section 1030A, the £25,000 condition and the two year dissolution requirement.
- CTM36305, Company Taxation Manual, HMRC, on the Targeted Anti-Avoidance Rule and Conditions A to D.
- Business Asset Disposal Relief, GOV.UK, on the 18% rate from 6 April 2026 and the qualifying conditions.
- Cancel your VAT registration, GOV.UK, on the 30 day deadline, form VAT7 and the £1,000 threshold for stock and assets.
- Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, legislation.gov.uk, on the power to investigate and disqualify directors of dissolved companies.